<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<FILENAME>d497.txt
<DESCRIPTION>AMERICAN STOCK EXCHANGE DIAMONDS
<TEXT>
<PAGE>

STATEMENT DATED FEBRUARY 27, 2002

                         DIAMONDS/SM/ TRUST, SERIES 1
           (A Unit Investment Trust organized in the United States)

                               -----------------

                         STATEMENT ISSUED PURSUANT TO
                          THE SEVENTH SCHEDULE OF THE
                    COMPANIES ACT, CHAPTER 50 OF SINGAPORE

      This Statement incorporates the Prospectus dated February 22, 2002
                 issued by the DIAMONDS Trust, attached hereto

                               -----------------

The DIAMONDS Trust, Series 1 has been admitted to the Official List of the
Singapore Exchange Securities Trading Limited ("SGX-ST"), and permission has
been granted by the SGX-ST to deal in and for quotation on the SGX-XTRANET of
all the DIAMONDS already issued as well as those DIAMONDS which may be issued
from time to time. The SGX-ST assumes no responsibility for the correctness of
any of the statements made or opinions expressed in this Statement and
admission to the Official List of the SGX-ST is not to be taken as an
indication of the merits of the DIAMONDS Trust, Series 1 or DIAMONDS.

                                      S-1

<PAGE>

                         DIAMONDS/SM/ TRUST, SERIES 1

                              SINGAPORE STATEMENT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                       Page
                                                       ----
                     <S>                               <C>
                     DIAMONDS TRUST, SERIES 1.........  S-3
                     CORPORATE INFORMATION............  S-5
                     TRADING AND SETTLEMENT...........  S-6
                     GENERAL AND STATUTORY INFORMATION S-10
</TABLE>

"Dow Jones Industrial Average/SM/", "DJIA/SM/", "Dow Jones/SM/", "The Dow/SM/",
"THE DOW INDUSTRIALS/SM/", and "DIAMONDS/SM/", are trademarks and service marks
of Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for
certain purposes by PDR Services LLC and American Stock Exchange LLC pursuant
to a "License Agreement" with Dow Jones. The Trust, based on the DJIA, is not
sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advisability of investing in the Trust.

                                      S-2

<PAGE>

                           DIAMONDS TRUST, SERIES 1

   This Statement, relating to the DIAMONDS Trust, Series 1 ("Trust"), which is
issued pursuant to the Seventh Schedule of the Companies Act, Chapter 50 of
Singapore, has been lodged with and registered by the Registrar of Companies in
Singapore who takes no responsibility for its contents.

   This Statement incorporates the attached Prospectus dated February 22, 2002
issued by the Trust ("US Prospectus"). Terms defined in the US Prospectus shall
have the same meaning when used in this Statement.

   The Trust is a unit investment trust organized in the United States ("US")
that issues securities called The Dow Industrials/SM/ DIAMONDS/SM/ or
"DIAMONDS", which represent an undivided ownership interest in the portfolio of
stocks held by the Trust. The portfolio consists of substantially all of the
component common stocks which comprise the Dow Jones Industrial Average/SM/
("DJIA"). All DIAMONDS are denominated in US dollars ($).

   PDR Services LLC ("Sponsor"), the sponsor of the Trust, accepts full
responsibility for the accuracy of information contained in this Statement,
other than that given in the US Prospectus under the heading "Report of
Independent Accountants," and confirms, having made all reasonable enquiries,
that to the best of its knowledge and belief there are no other facts the
omission of which would make any statement in this Statement misleading.

   The Trust is governed by a trust agreement ("Trust Agreement") between
State Street Bank and Trust Company ("Trustee"), the trustee of the Trust, and
the Sponsor dated and executed as of January 13, 1998. Terms defined in the
Trust Agreement shall have the same meaning when used in this Statement.

   Copies of the Trust Agreement are available for inspection, free of charge,
at the offices of State Street Bank and Trust Company at 225 Franklin Street,
Boston, Massachusetts, US 02110, or by contacting Hon Cheung, Managing
Director, State Street Global Advisors Singapore Limited, at 8 Shenton Way,
17-01 Temasek Tower, Singapore 068811, by telephone at 8839-505/1/, during
normal Singapore business hours.

   Investors should seek professional advice to ascertain (a) the possible tax
consequences, (b) the legal requirements and (c) any foreign exchange
restrictions or exchange control requirements which they may encounter under
the laws of the

--------
/1/ State Street Global Advisors Singapore Limited will hold copies of the
    Trust Agreement for inspection by investors; however, it is not in any way
    acting as an agent for or acting as the Trustee.

                                      S-3

<PAGE>

countries of their citizenship, residence or domicile and which may be relevant
to the subscription, holding or disposal of DIAMONDS.

   Investors in the DIAMONDS Trust, Series 1 are advised to carefully consider
the risk factors set out under the heading "RISK FACTORS" on pages 9 to 12 of
the US Prospectus, and to refer to paragraph 16 of this Statement for a
discussion of the US and Singapore tax consequences of an investment in
DIAMONDS.

ENQUIRIES

   All enquiries about the DIAMONDS Trust, Series 1 or requests for additional
copies of this Statement should be directed to an investor's local broker.

IMPORTANT:    READ AND RETAIN THIS STATEMENT FOR FUTURE REFERENCE

                                      S-4

<PAGE>

                             CORPORATE INFORMATION

       Sponsor to the Trust:         PDR Services LLC
                                     c/o American Stock Exchange LLC
                                     86 Trinity Place
                                     New York, New York
                                     US 10006

       Legal advisers to the Sponsor Carter, Ledyard & Milburn
       as to US law:                 2 Wall Street
                                     New York, New York
                                     US 10005

       Legal advisers to the Sponsor Stamford LLC
       as to Singapore law:          6 Battery Road, #19-02,
                                     Singapore 049909
                                     Singapore
                                     Attn: Lee Suet Fern

       Trustee:                      State Street Bank and Trust Company
                                     225 Franklin Street
                                     Boston, Massachusetts
                                     US 02110

       Legal advisers to the Trustee Allen & Gledhill
       as to Singapore law:          36 Robinson Road, #18-01,
                                     City House, Singapore 068877
                                     Singapore
                                     Attn: Choo Wai Hong

       Auditors:                     PricewaterhouseCoopers LLP
                                     160 Federal Street
                                     Boston, Massachusetts
                                     US 02110

       US Distributor
         of Creation Units:          ALPS Distributors, Inc. (formerly
                                     ALPS Mutual Funds Services, Inc.)
                                     370 17th Street, Suite 3100
                                     Denver, Colorado
                                     US 80202

                                      S-5

<PAGE>

                            TRADING AND SETTLEMENT

   DIAMONDS are listed for trading under the market symbol DIA on the SGX-ST
where they may be bought and sold in the secondary market at any time during
the trading day. Market prices for DIAMONDS traded on the SGX-ST are available
on the SGX-ST website (http://esite.sgx.com/scripts/amexprice.asp). DIAMONDS
may also be purchased by Authorized Participants directly from the Trust in the
US by placing orders through the US Distributor in a minimum unit, called a
"Creation Unit," of 50,000 DIAMONDS or multiples thereof. Creation Units may
also be redeemed through a tender to the Trustee in the US. All Creation Unit
purchases and redemptions are done "in kind" only in the US, that is, through
the delivery or receipt of a specified portfolio of securities. For additional
details, please consult pages 24 to 27 and 29 to 33 in the US Prospectus
attached hereto.

   As with other securities, investors will pay negotiated brokerage
commissions and typical Singapore clearing fees and applicable taxes. In
addition, cash dividends to be distributed to investors in Singapore will be
net of expenses incurred by CDP (defined below), and where such expenses exceed
the amount of the dividends, the investors will not receive any distributions.
Brokerage commissions may be subject to Goods and Services Tax ("GST") of 3%.
There will be a Singapore clearing fee, which is currently at the rate of 0.05%
of the transacted value (up to a maximum of SGD200 per transaction or its
equivalent in foreign currencies). Clearing fees may be subject to GST in
Singapore of 3%. DIAMONDS are traded in US dollars ($) on the SGX-ST in 10 unit
round lots. The primary trading market for DIAMONDS is in the US, where
DIAMONDS are listed on the American Stock Exchange LLC ("American Stock
Exchange"). The term "market day" as used in this Statement means a business
day in which transactions in DIAMONDS can be executed and settled. Trading of
DIAMONDS on the SGX-ST may be halted if the Trust fails to comply with
continuing listing requirements and advertising guidelines of the SGX-ST.

   With respect to holders of DIAMONDS in Singapore, the trading and settlement
process, the system through which they receive distributions or the manner in
which information may be made available, among other aspects, may differ from
the information set forth in the US Prospectus. Holders of DIAMONDS in
Singapore should read this Statement carefully and all enquiries in relation
hereto should be directed to their local brokers.

1. General

   DIAMONDS are issued by the Trust in the form of certificateless securities
which are eligible "book-entry-only" securities of The Depository Trust Company
("DTC"). As "book-entry-only" securities, DIAMONDS are represented as global
securities on the DTC system and are registered in the name of Cede & Co. as
nominee for DTC and deposited with, or on behalf of, DTC.

                                      S-6

<PAGE>

   The Central Depository (Pte) Limited ("CDP") has entered into linking
agreements with the National Securities Clearing Corporation ("NSCC"), by which
CDP has access to DTC's depository and custodial services for subdepositing US
securities. CDP, through such linking agreements, has an account sponsored by
NSCC which is known as Sponsored Account No. 5700 ("Sponsored Account"), and is
recognized by NSCC as a record owner for DIAMONDS credited to the Sponsored
Account. CDP through the linking agreements may receive DIAMONDS from or
deliver DIAMONDS to accounts maintained by member participants in DTC ("DTC
Participants").

   Settlement of dealings through the CDP system may be effected only by
Depository Agents of CDP or holders of DIAMONDS who have their own direct
securities accounts with CDP. Investors may open a direct securities account
with CDP or a securities sub-account with any Depository Agent to hold their
DIAMONDS in CDP. The term "Depository Agent" shall have the same meaning
ascribed to it in section 130A of the Companies Act, Chapter 50 of Singapore.

   Through the delivery mechanisms discussed below, it is possible for
investors to purchase DIAMONDS in Singapore and sell them in the US and vice
versa. Although both CDP and DTC, within their own respective market
settlements, provide for Delivery Versus Payment and Free-of-Payment transfers
of securities, all of the linked transfers between the two depositories are
effected only on a Free-of-Payment basis (i.e., there is no related cash
movement to parallel the securities movement. Any related cash transfers may
only be effected outside DTC and CDP directly between the buyer and seller
through their own arrangements). Investors should be aware that Singapore time
is generally 12 hours ahead of Eastern Day Light Savings time (13 hours Eastern
Standard time) in New York, and that the American Stock Exchange and the SGX-ST
are not open at the same time. Because of this time difference between the
Singapore and US markets, trading in DIAMONDS between the two markets cannot
simultaneously occur.

   All dealings in, and transactions of, DIAMONDS in Singapore must be effected
for settlement through the computerised book-entry (scripless) settlement
system in the CDP. Investors should ensure that DIAMONDS sold on SGX-ST are
available for settlement in their CDP account no later than the third market
day following the transaction date.

   Investors' holdings of DIAMONDS in their CDP account will be credited or
debited for settlement on the third market day following the transaction date.
A transaction will fail if DIAMONDS are not in an investor's CDP account for
settlement on such day, and will be subject to the buy-in cycle on the fourth
market day following the transaction date.

   In the absence of unforeseen circumstances, the delivery of DIAMONDS into
and out of CDP will take a minimum of one market day after the duly completed

                                      S-7

<PAGE>

documentation has been submitted to CDP for processing, assuming that the
investor has given proper instructions to his or her DTC Participant.
Instructions and forms received by CDP after 10 a.m. Singapore time on a given
market day will be treated as being received on the next market day and, as
such, will be processed on the next market day.

2. Delivery of DIAMONDS to CDP for Trading on the SGX-ST

   Investors who hold DIAMONDS in DTC's system in the US and wish to trade them
on the SGX-ST can direct delivery of DIAMONDS to CDP; this book-entry transfer
to CDP's Sponsored Account at DTC may be effected only on a Free-of-Payment
basis, and is subject to special procedures that will help to identify the
relevant CDP Depository Agent. Investors may deliver their DIAMONDS by
informing their Singapore broker or Depository Agent to submit delivery
instructions to CDP, together with the applicable CDP delivery fee and GST, no
later than 10 a.m. Singapore time on the specified delivery date. Investors
must concurrently instruct their DTC Participant to deliver such DIAMONDS into
the Sponsored Account on the delivery date. Upon notification that its
Sponsored Account has been credited, CDP will accordingly credit DIAMONDS to
the investor's account.

   Investors should ensure that their DIAMONDS are delivered into their
securities account with CDP in time for settlement. In the event an investor
cannot deliver DIAMONDS for settlement pursuant to the trade, the SGX-ST may
buy-in against him or her.

3. Delivery of DIAMONDS out of CDP for Trading on the American Stock Exchange

   (a) Investors who hold DIAMONDS with CDP and wish to trade on the American
Stock Exchange must arrange to deliver DIAMONDS into their accounts with their
DTC Participant for settlement of any such trade, which will occur on the third
market day following the transaction date. For such delivery, investors must
submit a duly completed CDP delivery form together with the applicable CDP
delivery fee and GST through their Singapore broker or Depository Agent, no
later than 10 a.m. Singapore time on the third market day following the
specified delivery date in the US. Investors must concurrently instruct their
DTC Participant to expect receipt of the relevant number of DIAMONDS from the
Sponsored Account. Upon receipt of the duly completed CDP delivery form, CDP
will debit the investor's securities account for the relevant number of
DIAMONDS and then instruct DTC to deliver DIAMONDS to the DTC Participant
account as specified by the investor.

   (b) An investor who buys DIAMONDS on the SGX-ST and sells on the American
Stock Exchange on the same day must instruct CDP to deliver DIAMONDS to his or
her DTC Participant account no later than 10 a.m. Singapore time on the US

                                      S-8

<PAGE>

settlement date PROVIDED that the investor is a sub-account holder of CDP's
Depository Agent and the purchase on the SGX-ST is tagged as a Delivery Versus
Payment ("DVP") settlement. The Depository Agent of the investor must send an
instruction to deliver the relevant number of DIAMONDS from its sub-account to
the CDP via CDP's Delivery Versus Payment Foreign Broker ("DVP-FB") Computer
System no later than 10 a.m. Singapore time on the US settlement date. Upon
affirming the delivery instruction, CDP will instruct DTC to deliver DIAMONDS
from the Sponsored Account to the DTC Participant account as specified by the
investor.

                           EXCHANGE RATES AND RISKS

   DIAMONDS traded on the SGX-ST are denominated and traded in US dollars.
DIAMONDS may only be created or redeemed in US dollars in the manner set out in
the US Prospectus. Similarly, the distributions which may be made by the
Trustee are in US dollars. To the extent a Singapore investor wishes to convert
such US dollar holdings or distributions to Singapore dollars, fluctuations in
the exchange rate between the Singapore dollar and the US dollar may affect the
value of the proceeds from a currency conversion.

                                      S-9

<PAGE>

                       GENERAL AND STATUTORY INFORMATION

1. Appointment of Auditors

   The Trust Agreement provides that the accounts of the Trust shall be
audited, as required by US law, by independent certified public accountants
designated from time to time by the Trustee.

2. Duties and Obligations of the Trustee

   The key duties and obligations imposed on the Trustee under the Trust
Agreement are summarized as follows:

      (i) the Trustee will accept on behalf of the Trust deposits of Portfolio
   Deposits and be authorized to effect registration or transfer of the
   Securities in its name or the name of its nominee or the nominee of its
   agent;

      (ii) the Trustee must hold money received pursuant to the Trust Agreement
   as a deposit for the account of the Trust;

      (iii) the Trustee shall not be liable for the disposition of money or
   securities or evaluation performed under the Trust Agreement except by
   reason of its own gross negligence, bad faith, wilful misconduct, wilful
   malfeasance or reckless disregard of its duties and obligations under the
   Trust Agreement;

      (iv) the Trustee is not obligated to appear in, prosecute or defend any
   action if it is of the opinion that it may involve it in expense or
   liability unless it is furnished with reasonable security and indemnity
   against such expense or liability; if reasonable indemnity is provided, the
   Trustee shall, in its discretion, undertake such action as it may deem
   necessary to protect the Trust and the rights and interest of all beneficial
   owners;

      (v) the Trustee must provide to brokers/underwriters accounts of the
   Trust audited by the auditors of the Trust, and the brokers/underwriters
   will deliver such accounts to beneficial owners;

      (vi) in performing its functions under the Trust Agreement the Trustee
   will not be held liable except by reason of its own gross negligence, bad
   faith, wilful misconduct or wilful malfeasance for any action taken or
   suffered to be taken by it in good faith and believed by it to be authorized
   or within the discretion, rights or powers conferred on it or reckless
   disregard of its duties and obligations;

      (vii) the Trustee must ensure that no payment made to the Sponsor is for
   expenses of the Trust, except for payments not in excess of amounts and for
   purposes prescribed by the US Securities and Exchange Commission and
   authorized by the Trust Agreement;

                                     S-10

<PAGE>

      (viii) the Trustee must keep proper books of record and account of all
   transactions under the Trust Agreement, including the creation and
   redemption of Creation Units, at its offices, and keep such books open for
   inspection by any beneficial owner at all reasonable times during usual
   business hours;

      (ix) the Trustee must make such reports and file such documents as are
   required by the Securities Act of 1933, the Securities Exchange Act of 1934,
   the Investment Company Act of 1940 and US state or federal tax laws and
   regulations;

      (x) the Trustee must keep a certified copy of the Trust Agreement,
   together with the Indenture for each Trust Series then in effect and a
   current list of Securities therein, on file at its office and make the same
   available for inspection; and

      (xi) the Trustee must charge and direct from the assets of the Trust all
   expenses and disbursements incurred under the Trust Agreement, or shall
   reimburse itself from the assets of the Trust or the sale of securities in
   the Trust for any advances made out of its own funds for such expenses and
   disbursements.

3. Contracts

   A holder of DIAMONDS is not required, obliged or entitled in connection with
the Trust to enter into any contract with any person or corporation whether by
way of lease or otherwise.

4. Vesting of Assets in the Trust

   The Trustee has legal title to all securities and other property in which
funds of the Trust are invested, all funds held for such investment, all
equalisation, redemption, and other special funds of the Trust, and all income
upon accretions to, and proceeds of such property and funds, and the Trustee is
required to segregate and hold the same in trust until distribution thereof to
the holders of DIAMONDS.

5. Redemption

   The Trust is not administered by a management company, and there is no
obligation of the Sponsor or the Trustee to redeem any DIAMONDS. As described
on pages 29 to 33 in the US Prospectus, it is the Trust itself that is
obligated to effect the redemption (although it is the Trustee acting as agent
for the Trust that will actually effect the redemption).

6. Transfer of DIAMONDS

   As described on page S-6 of this Statement, Cede & Co., as nominee for DTC,
will be the registered owner of all outstanding DIAMONDS on the DTC system.
Beneficial ownership of DIAMONDS will be shown on the records of DTC or its

                                     S-11

<PAGE>

participants. Beneficial ownership records for holders of DIAMONDS in Singapore
will be maintained at CDP.

   No certificates will be issued in respect of DIAMONDS. Transfers of DIAMONDS
between investors will normally occur through the trading mechanism of the
SGX-ST or the American Stock Exchange as described on pages 27 to 29 in the US
Prospectus and in this Statement.

7. Meetings of Holders of DIAMONDS; Voting; Distribution of Annual Reports

   The Trust is not required by law to convene meetings of beneficial owners of
DIAMONDS.

   The Sponsor, the Trustee and CDP have entered into a Depository Agreement
dated May 18, 2001 ("CDP Depository Agreement"), pursuant to which CDP has
agreed to act as the depository for DIAMONDS in Singapore. CDP's duties under
the CDP Depository Agreement include, among other things: (i) acting as a bare
trustee on behalf of individuals who hold securities accounts with CDP and
Depository Agents authorized to maintain sub-accounts with CDP in respect of
DIAMONDS, (ii) distributing to CDP account holders and Depository Agents any
applicable payments or cash distributions in respect of DIAMONDS, and (iii)
providing the list of its Depository Agents and holders of DIAMONDS who have
their own direct securities accounts with CDP, if so requested by the Sponsor
or the Trustee.

   Pursuant to the CDP Depository Agreement, the Sponsor and the Trustee have
appointed Automatic Data Processing, Inc. ("ADP") as the "Collation and
Distribution Agent" in Singapore, whose duties include: (i) collecting and
collating any consents or votes of, and (ii) distributing notices, statements,
reports, prospectuses, consent instructions, consent forms and other written
communications to, the holders of DIAMONDS in Singapore.

   The Trustee shall provide ADP with sufficient copies of each investor
communication, in such form, number and at such place or places as ADP may
reasonably request, in order that such communication may be transmitted,
directly or indirectly, to investors. Promptly after the end of each fiscal
year, the Trustee will furnish to ADP for distribution to each person who was a
holder of DIAMONDS in Singapore at the end of such fiscal year, an annual
report of the Trust. In addition, the Trust shall reimburse CDP and ADP for the
costs of providing the Trustee with the foregoing information and for their
fees and expenses for such transmission.

8. Declaration

   It is hereby declared that no DIAMONDS shall be created or issued pursuant
to this Statement later than 12 months, or such other period as may be
prescribed by the law for the time being in force, after the date of this
Statement.

                                     S-12

<PAGE>

9. Allotment of DIAMONDS

   A Distribution Agreement was entered into as of September 29, 1997 between
(1) the Sponsor, (2) the Trust and (3) ALPS Mutual Funds Services, Inc., now
ALPS Distributors, Inc. ("ALPS"), the US Distributor, pursuant to which the
Trust and the Sponsor retained ALPS to:

      (i) act as the exclusive distributor for the creation and distribution of
   DIAMONDS in aggregations of 50,000 DIAMONDS;

      (ii) hold itself available to receive and process orders for Creation
   Units of DIAMONDS; and

      (iii) to enter into arrangements with dealers.

   It is the duty of the Trust and the Sponsor to create the aggregations of
50,000 DIAMONDS and to request DTC to record on its books the ownership of such
DIAMONDS in such amounts as ALPS has requested, as promptly as practicable
after receipt by the Trustee of the requisite portfolio of securities and any
applicable cash component from the creator of the Creation Units or other
entities having a Participant Agreement with the Trustee. Participant
Agreements must be entered into between the Trustee and all other persons who
are creating Creation Units.

10.  Borrowing powers

   There are no borrowing powers conveyed in the Trust Agreement.

11.  Sponsor and Trustee

  Sponsor

   PDR Services LLC was originally organized as a corporation under Delaware US
law, and was subsequently converted into a limited liability company in
Delaware on April 6, 1998. It is wholly owned by the American Stock Exchange,
and was formed in Delaware to act as sponsor for the American Stock Exchange's
exchange traded funds and other unit investment trusts. The Sponsor will remain
the Sponsor of the Trust until it is removed, it resigns or the Trust Agreement
is terminated. Although the Sponsor is entitled to, it receives no remuneration
for the services it renders as Sponsor.

  Trustee

   State Street Bank and Trust Company is a bank and trust company organized
under the laws of the Commonwealth of Massachusetts, US in 1961, the
culmination of a series of mergers among 13 predecessors, the oldest of which,
Union Bank, was

                                     S-13

<PAGE>

founded in 1792. The Trustee is a wholly owned subsidiary of State Street
Corporation, a financial holding company. The Trustee will remain the Trustee
of the Trust until it is removed, it resigns or the Trust Agreement is
terminated. The remuneration received by the Trustee in its capacity as Trustee
of the Trust is described in the US Prospectus and reflected in the financial
statements contained therein. Absent gross negligence, bad faith, wilful
misconduct or wilful malfeasance on its part or reckless disregard of its
duties and obligations under the Trust Agreement, the Trustee shall be
indemnified from the Trust and held harmless against any loss, liability or
expense incurred arising out of or in connection with the acceptance or
administration of the Trust and any actions taken in accordance with the
provisions of the Trust Agreement.

12.  Exercise of Voting Rights on Underlying Securities

   The Trustee (rather than the beneficial owners of DIAMONDS) has the right to
vote all of the voting stocks in the Trust, as Trustee. It must vote the voting
stocks of each issuer in the same proportionate relationship as all other
shares of each such issuer are voted to the extent permissible and, if not
permitted, abstain from voting. There are no restrictions on the Trustee's
right to vote securities or DIAMONDS when such securities or DIAMONDS are owned
by the Trustee in its individual capacity.

13.  Adjustments to Securities Held by the Trust

   The Trust's portfolio securities are not managed and the Trustee adjusts
such securities from time to time to maintain the correspondence between the
composition and weightings of the securities held by the Trust and the DJIA.

14.  Distributions to Beneficial Owners

   The Trustee receives all dividends and other cash distributed with respect
to the underlying securities in the Trust (including monies realized by the
Trustee from the sale of options, warrants or other similar rights received on
such securities), and distributes them (less fees, expenses and any applicable
taxes) through DTC and the DTC Participants to the beneficial owners of
DIAMONDS. A description of the distribution process is contained on pages 53 to
55 of the US Prospectus. These distribution arrangements will be the same for
holders of DIAMONDS in Singapore, who will receive their entitlements through
CDP. Cash dividends distributed to investors in Singapore will be net of
expenses incurred by CDP. Where such expenses exceed the amount of the
dividend, investors will not receive any dividend.

15.  Consents

   PricewaterhouseCoopers LLP, as the auditor of the Trust, has given and has
not withdrawn its written consent to the issue of this Statement with the
inclusion herein of, and reference to, as the case may be, (i) its name and
(ii) its report, in the form and

                                     S-14

<PAGE>

context in which it is referred to in this Statement. The report referred to in
this Statement was not prepared by PricewaterhouseCoopers LLP for the purpose
of inclusion in this Statement.

   Carter, Ledyard & Milburn (as legal advisers to the Sponsor as to US law),
Stamford LLC (as legal advisers to the Sponsor as to Singapore law) and Allen &
Gledhill (as legal advisers to the Trustee as to Singapore law), have given and
have not withdrawn their respective written consents to the inclusion in this
Statement of references to their respective names in the form and context which
they respectively appear in this Statement.

16.  Important Tax Information

A. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

   The following is a general description of the material US federal income tax
consequences of the ownership and disposition of DIAMONDS applicable to a
holder of DIAMONDS who, for purposes of US taxation and any applicable tax
treaty or convention, has not been and will not be a US citizen or resident, a
corporation organized in the US, or an estate or trust which is taxable by the
US on all of its income regardless of source ("non-resident holder").

   This description is for general information purposes only and is based on
the US Internal Revenue Code of 1986, as amended ("Code"), Treasury regulations
promulgated thereunder, and judicial and administrative interpretations
thereof, all as in effect on the date hereof and all of which are subject to
change. The tax treatment of a non-resident holder may vary depending upon his
or her particular situation. Certain non-resident holders may be subject to
special rules not discussed below. The discussion below does not address the
effect of any state, local or foreign tax law on a non-resident holder, and
does not address non-resident holders engaged in business in the US. Purchasers
of DIAMONDS are advised to consult their own tax advisers with respect to an
investment in DIAMONDS.

  Tax Consequences of Trust Units Ownership

  Ordinary Income Dividends

   Dividends paid by the Trust from its investment company taxable income
(which includes dividends, interest and the excess of net short-term capital
gains over net long-term capital losses) to non-resident holders will generally
be subject to US withholding tax at a rate of thirty percent (30%). The amount
will be withheld by the dividend paying agent from all dividend distributions.
If a non-resident holder does not provide the appropriate IRS Form W-8, US tax
may be withheld at the higher rate of thirty-one percent (31%) (see "Backup
Withholding Rules" below).

                                     S-15

<PAGE>

   In certain circumstances, the thirty percent (30%) withholding tax rate may
be reduced pursuant to an income tax treaty. Treaty benefits are generally
available only to persons that are qualified residents of a country with which
the US has a treaty, and who provide a US Internal Revenue Service ("IRS") Form
W-8BEN certifying entitlement to such benefits. There is currently no income
tax treaty between the US and Singapore.

  Treatment of Capital Gain Distributions and Sales Proceeds

   Capital gain distributions (distributions from the excess of net long-term
capital gains over net short-term capital losses) to non-resident holders and
proceeds from the sale of Trust Units by a non-resident holder will generally
not be subject to US withholding tax.

  Backup Withholding Rules

   "Backup withholding" is required on the payment of certain amounts to
US persons, in order to enforce collection of income taxes owed by such
persons. In general, non-US persons are exempt from US "backup withholding." In
order to establish such exemption, however, a non-resident holder generally
must supply appropriate documentation (generally, an IRS Form W-8BEN) to the
paying agent (or its agent) or to the financial institution through which the
non-resident holder holds DIAMONDS. Payments that cannot be reliably associated
with documentation are generally presumed to be made to a US payee who is not
an exempt recipient, in which case thirty-one percent (31%) backup withholding
will apply to all payments.

   As an exception to this general rule, a payee is presumed to be foreign if
certain indicia of foreign status exist. Additionally, a payment that would be
subject to withholding tax if made to a foreign person and which is exempt from
backup withholding as a payment to a non-US account is presumed to be made to a
foreign payee. Accordingly, ordinary dividends paid to a non-US account would
generally be subject to withholding tax at the rate of thirty percent (30%).

   Payments to foreign intermediaries are subject to a special set of
presumptions summarized below. Foreign intermediaries generally include foreign
financial institutions, foreign clearing organizations, foreign branches or
offices of a US financial institution or US clearing organization, and certain
foreign corporations.

   If the foreign intermediary has not provided a valid intermediary
withholding certificate, it is generally treated as an undocumented owner of
the payment. A determination must then be made, based on factors set forth in
the tax regulations, whether to treat the payee as an individual, trust,
estate, corporation, or partnership. If the payee is presumed to be an
individual, trust, estate, or partnership, it is presumed

                                     S-16

<PAGE>

to be a US person who is not an exempt recipient and the thirty-one percent
(31%) backup withholding rules would apply to all payments. If the payee is
presumed to be a corporation, then it is also presumed to be a US person.
However, if the amount paid consists of an amount that is subject to
withholding, such as dividends, the corporate payee is presumed to be a foreign
payee if there are indicia of foreign status, in which case withholding tax at
the thirty percent (30%) rate is imposed.

   If the foreign intermediary (other than a qualified intermediary that has
assumed primary withholding responsibility) has provided a valid intermediary
withholding certificate, but the intermediary's withholding certificate is
unreliable either because the withholding agent or payor has not been given
sufficient information to determine the proper amount of withholding or because
some or all of the underlying certificates that are required to be attached are
lacking or are unreliable, the payment is presumed to be made to a foreign
payee for whom the foreign intermediary collects the payment. Therefore, a
dividend is subject to withholding tax at the thirty percent (30%) rate.

   The amount of any "backup withholding" (in contrast to the thirty percent
(30%) withholding tax imposed on ordinary dividends) from a payment to a
non-resident holder will be allowed as a credit against the non-resident
holder's US federal income tax liability and may entitle such non-resident
holder to a refund from the IRS to the extent such "backup withholding" is not
needed to satisfy the thirty percent (30%) withholding tax liability that may
have otherwise been imposed on such payment, provided that the required
information is furnished to the IRS.

  US Estate Tax

   The estate of a non-resident individual holder of DIAMONDS may be subject to
US estate tax on the value of such DIAMONDS, which are considered US situs
property for such purposes. An estate tax credit is currently available for the
estates of non-residents, the effect of which is to exempt up to $60,000 of US
situs property. US estate tax is imposed at graduated rates, the highest of
which is currently fifty-five percent (55%). If the holder is a qualified
resident of a country with which the US maintains an estate tax treaty,
DIAMONDS may be exempt from estate tax. There is currently no estate tax treaty
between the US and Singapore.

   The estate of a non-resident individual holder of Trust Units that is
subject to US estate tax must generally file an IRS Form 706-NA ("United States
Estate (and Generation-Skipping Transfer) Tax Return--Estate of non-resident
not a citizen of the US") within nine months of the non-resident individual
holder's date of death. Subject to certain exceptions, if the estate of the
non-resident alien takes a tax return position that any estate tax treaty of
the US overrules or modifies any provision of the Code and thereby effects (or
potentially effects) a reduction of estate tax, the estate must disclose such
position on a statement attached to such return in the form required

                                     S-17

<PAGE>

by US Treasury regulations. The requirement of attaching a statement to the
estate tax return is generally satisfied by attaching an IRS Form 8833
("Treaty-Based Return Position Disclosure under Section 6114 or 7701(b)") to
such return. If a tax return would not otherwise be required to be filed, a tax
return must nevertheless be filed for purposes of making the required
disclosures discussed above.

   The US estate tax is a lien against a non-resident decedent's assets for ten
years unless the tax is paid in full or otherwise provided for in accordance
with US Treasury regulations. Upon payment in full (or provision for such
payment) of the US estate tax liability, a transfer certificate will be issued
permitting the non-resident decedent's assets to be transferred without
liability.

   The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax adviser concerning the US
and foreign tax consequences to them of an investment in DIAMONDS.

B. CERTAIN SINGAPORE TAX CONSIDERATIONS

   The following is a general description of material Singapore income tax,
capital gains tax, stamp duty and estate duty consequences of the ownership and
disposal of DIAMONDS. The discussion below is not intended to constitute a
complete analysis of all tax consequences relating to ownership and disposal of
DIAMONDS by a person who, for purposes of taxation in Singapore, is regarded a
Singapore resident taxpayer or otherwise. Prospective investors of DIAMONDS
should consult their own tax adviser concerning the tax consequences of their
particular situations. This description is based on laws, regulations and
interpretations now in effect and available as of the date of this Statement.
The laws, regulations and interpretations, however, may change at any time, and
any change could be retroactive. These laws and regulations are also subject to
various interpretations and the relevant tax authorities or the courts could
later disagree with the explanations or conclusions set out below.

  General

   Singapore resident taxpayers, such as individuals who are residing in
Singapore and companies which are controlled or managed in Singapore, are
subject to Singapore income tax on income accruing in or derived from Singapore
or received in Singapore from outside Singapore.

   A corporate taxpayer is regarded as a tax resident in Singapore if the
company's business is controlled and managed in Singapore (for example, if the
board of directors meets and conducts the company's business in Singapore). An
individual is regarded as resident in Singapore if the individual is physically
present in Singapore or exercises an employment in Singapore (other than as a
director of a company) for 183 days or more in a calendar year, or if the
individual resides in Singapore.

                                     S-18

<PAGE>

   The corporate tax rate in Singapore is 24.5% for the year of assessment
2002. In addition, 75% of the first SGD10,000 and 50% of the next SGD90,000 of
a company's chargeable income (excluding Singapore dividends) are exempted from
tax.

   All tax residents in Singapore will be affected by tax rebates and
exemptions granted by the Singapore government from time to time in line with
its current financial and fiscal policies.

  Ordinary Income Dividends

   Dividends paid by the Trust on DIAMONDS received by a Singapore resident
individual in Singapore will be liable to tax in Singapore. The rate of tax
will vary according to the individual's circumstances but is subject to a
maximum rate of 26% for the year of assessment 2002.

   Dividends on DIAMONDS received by a Singapore resident company in Singapore
will be liable to tax in Singapore at the corporate income tax rate, unless an
exemption or concessionary rates are applicable to them.

  Gains on Disposal of DIAMONDS

   Singapore does not impose tax on capital gains. However, gains or profits
from any trade, business, profession or vocation will be subject to Singapore
income tax. Any profits from the disposal of DIAMONDS are not taxable in
Singapore unless the seller is regarded as having derived gains of an income
nature, in which case, such profits would be taxable.

  Stamp Duty

   Stamp duty is not applicable to electronic transfers of DIAMONDS through the
CDP system.

  Estate Duty

   Singapore estate duty is imposed on the value of most movable and immovable
property situated in Singapore owned by individuals who are not domiciled in
Singapore, subject to specific exemption limits. Singapore estate duty is
imposed on the value of most immovable property situated in Singapore and on
most movable property, wherever it may be, owned by individuals who are
domiciled in Singapore, subject to specific exemption limits. DIAMONDS are
considered to be movable property situated outside Singapore.

   DIAMONDS held by an individual who is domiciled in Singapore are subject to
Singapore estate duty upon such individual's death. Singapore estate duty is
payable to the extent that the value of DIAMONDS aggregated with any other
assets subject to Singapore estate duty exceeds SGD600,000. Unless other
exemptions apply to the

                                     S-19

<PAGE>

other assets, for example, the separate exemption limit for residential
properties, any excess beyond SGD600,000 will be taxed at 5% on the first
SGD12,000,000 of the individual's Singapore chargeable assets and thereafter at
10%. Prospective investors should consult their own tax adviser regarding the
Singapore estate duty consequences of their ownership of DIAMONDS.

                                     S-20

<PAGE>

Prospectus

                         DIAMONDS/SM/ Trust, Series 1

                           (A Unit Investment Trust)

                               -----------------

 .  DIAMONDS Trust is an exchange traded fund designed to generally correspond
   to the price and yield performance of the Dow Jones Industrial Average.

 .  DIAMONDS Trust holds all of the Dow Jones Industrial Average stocks.

 .  Each DIAMONDS unit represents an undivided ownership interest in the
   DIAMONDS Trust.

 .  The DIAMONDS Trust issues and redeems DIAMONDS units only in multiples of
   50,000 DIAMONDS in exchange for Dow Jones Industrial Average stocks and cash.

 .  Individual DIAMONDS units trade on the American Stock Exchange like any
   other equity security.

 .  Minimum trading unit: 1 DIAMONDS unit.

                               -----------------

                           SPONSOR: PDR SERVICES LLC
                 (Solely Owned by American Stock Exchange LLC)

                            THE DOW INDUSTRIALS/SM/
                                 DIAMONDS/SM/



THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

                               -----------------

                      Prospectus Dated February 22, 2002

                               -----------------

                     COPYRIGHT(R) 2002 by PDR Services LLC

<PAGE>

                           DIAMONDS TRUST, SERIES 1
<TABLE>
<CAPTION>
                             TABLE OF CONTENTS
   <S>                                                                   <C>
   Summary..............................................................  1
    Essential Information as of October 31, 2001........................  1
    Highlights..........................................................  3
    Risk Factors........................................................  9
   Report of Independent Accountants.................................... 13
    Statement of Assets and Liabilities................................. 14
    Statement of Operations............................................. 15
    Statement of Changes in Net Assets.................................. 16
    Financial Highlights................................................ 17
    Notes to Financial Statements....................................... 18
    Schedule of Investments............................................. 23
   The Trust............................................................ 24
    Creation of Creation Units.......................................... 24
    Procedures for Creation of Creation Units........................... 26
    Placement of Creation Orders Using DIAMONDS Clearing Process........ 26
    Placement of Creation Orders Outside DIAMONDS Clearing Process...... 27
    Securities Depository; Book-Entry-Only System....................... 27
   Redemption of DIAMONDS............................................... 29
    Procedures for Redemption of Creation Units......................... 29
    Placement of Redemption Orders Using DIAMONDS Clearing Process...... 32
    Placement of Redemption Orders Outside DIAMONDS Clearing Process.... 32
   The Portfolio........................................................ 33
    Portfolio Securities Conform to the DJIA............................ 33
</TABLE>
<TABLE>
<CAPTION>
                         TABLE OF CONTENTS cont'd
   <S>                                                                    <C>
    Adjustments to the Portfolio Deposit................................. 36
   The DJIA.............................................................. 37
   License Agreement..................................................... 42
   Exchange Listing...................................................... 43
   Tax Status of the Trust............................................... 44
    Tax Consequences to Beneficial Owners................................ 44
    ERISA Considerations................................................. 47
   Continuous Offering of DIAMONDS....................................... 47
   Dividend Reinvestment Service......................................... 48
   Expenses of the Trust................................................. 49
    Trustee Fee Scale.................................................... 51
   Valuation............................................................. 52
   Administration of the Trust........................................... 53
    Distributions to Beneficial Owners................................... 53
    Statements to Beneficial Owners; Annual Reports...................... 55
    Rights of Beneficial Owners.......................................... 55
    Amendments to the Trust Agreement.................................... 56
    Termination of the Trust Agreement................................... 56
   Sponsor............................................................... 58
   Trustee............................................................... 59
   Depository............................................................ 60
   Legal Opinion......................................................... 60
   Independent Accountants............................................... 61
   Code of Ethics........................................................ 61
   Daily DIAMONDS Trading Information.................................... 61
   Information and Comparisons Relating to Trust, Secondary Market
    Trading, Net Asset Size, Performance and Tax Treatment............... 62
   Glossary.............................................................. 70
</TABLE>

"Dow Jones Industrial Average"/SM/, "DJIA"/SM/, "Dow Jones"/SM/, "The Dow"/SM/,
"THE DOW INDUSTRIALS"/SM/ and "DIAMONDS"/SM/ are trademarks and service marks
of Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for
certain purposes by PDR Services LLC and American Stock Exchange LLC pursuant
to a "License Agreement" with Dow Jones. The Trust, based on the DJIA, is not
sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advisability of investing in the Trust.


                                      i

<PAGE>

                                    SUMMARY

                 Essential Information as of October 31, 2001*

Glossary:                    All defined terms used in this Prospectus and page
                             numbers on which their definitions appear are
                             listed in the Glossary on page 70.

Total Trust Assets:          $2,734,476,408

Number of DIAMONDS:          30,101,813

Fractional Undivided
Interest in the Trust
Represented by each
DIAMONDS unit:               1/30,101,813/th/

Dividend Record Dates:       Monthly

Dividend Payment Dates:      Monthly
Trustee's Annual Fee:        From 6/100 of one percent to 10/100 of one
                             percent, based on the NAV of the Trust, as the
                             same may be adjusted by certain amounts.

Estimated Ordinary
Operating Expenses of the
Trust:                       18/100 of one percent (0.1800%) (inclusive of
                             Trustee's annual fee).**

NAV per DIAMONDS unit
(based on the value of the
Portfolio Securities,
other net assets of the
Trust and number of
DIAMONDS outstanding):       $90.84

Evaluation Time:             Closing time of the regular trading session on the
                             New York Stock Exchange, Inc. (ordinarily 4:00
                             p.m. New York time).

Licensor:                    Dow Jones & Company, Inc.

Mandatory Termination Date:  The Trust is scheduled to terminate no later than
                             January 13, 2123, but may terminate earlier under
                             certain circumstances.

Discretionary Termination:   The Trust may be terminated if at any time the
                             value of the securities held by the Trust

                                      1

<PAGE>

                             is less than $350,000,000, as adjusted for
                             inflation. The Trust may also be terminated under
                             other circumstances.

Market Symbol:               DIAMONDS trade on the American Stock Exchange
                             under the symbol "DIA".

CUSIP:                       252787106
--------
  * The Trust Agreement became effective, the initial deposit was made and the
    Trust commenced operation on January 13, 1998.
 ** Ordinary operating expenses of the Trust currently are being accrued at an
    annual rate of 0.1800% and after earnings credits of 0.0033 are applied,
    the net expenses of the Trust are 0.1767%. Future accruals will depend
    primarily on the level of the Trust's net assets and the level of Trust
    expenses. The Sponsor has undertaken that the ordinary operating expenses
    will not exceed an amount that is 0.1800% of the daily NAV of the Trust,
    but this amount may be changed. Therefore, there is no guarantee that the
    Trust's ordinary operating expenses will not exceed 0.1800% of the Trust's
    daily NAV.

                                      2

<PAGE>

                                  Highlights

 .  DIAMONDS are Ownership Interests in the DIAMONDS Trust

   DIAMONDS Trust, Series 1 ("Trust") is a unit investment trust that issues
securities called "DIAMONDS". The Trust is organized under New York law and is
governed by a trust agreement between State Street Bank and Trust Company
("Trustee") and PDR Services LLC ("Sponsor"), dated and executed as of January
13, 1998 ("Trust Agreement"). DIAMONDS represent an undivided ownership
interest in a portfolio of all of the common stocks of the Dow Jones Industrial
Average ("DJIA").

 .  DIAMONDS Should Closely Track the Value of the Stocks Included in the DJIA

   DIAMONDS intend to provide investment results that, before expenses,
generally correspond to the price and yield performance of the DJIA. Current
information regarding the value of the DJIA is available from market
information services. Dow Jones obtains information for inclusion in, or for
use in the calculation of, the DJIA from sources Dow Jones considers reliable.
None of Dow Jones, the Sponsor, the Trust or the Exchange accepts
responsibility for or guarantees the accuracy and/or completeness of the DJIA
or any data included in the DJIA.
   The Trust holds the Portfolio and cash and is not actively "managed" by
traditional methods, which typically involve effecting changes in the Portfolio
on the basis of judgments made relating to economic, financial and market
considerations. To maintain the correspondence between the composition and
weightings of stocks held by the Trust ("Portfolio Securities" or,
collectively, "Portfolio") and component stocks of the DJIA ("Index
Securities"), the Trustee adjusts the Portfolio from time to time to conform to
periodic changes in the identity and/or relative weightings of Index
Securities. The Trustee generally makes these adjustments to the Portfolio
within three (3) Business Days (defined below) before or after the day on which
changes in the DJIA are scheduled to take effect. Any change in the identity or
weighting of an Index Security will result in a corresponding adjustment to the
prescribed Portfolio Deposit effective on any day that the New York Stock
Exchange is open for business ("Business Day") following the day on which the
change to the DJIA takes effect after the close of the market.

   The value of DIAMONDS fluctuates in relation to changes in the value of the
Portfolio. The market price of each individual DIAMONDS may not be identical to
the net asset value ("NAV") of such DIAMONDS but, historically, these two
valuations have been very close.

                                      3

<PAGE>

 .  DIAMONDS Trade on the American Stock Exchange

   DIAMONDS are listed for trading on the American Stock Exchange ("Exchange"),
and are bought and sold in the secondary market like ordinary shares of stock
at any time during the trading day. DIAMONDS are traded on the Exchange in 100
DIAMOND round lots, but can be traded in odd lots of as little as one DIAMOND.
The Exchange may halt trading of DIAMONDS under certain circumstances.

 .  Brokerage Commissions on DIAMONDS

   Secondary market purchases and sales of DIAMONDS are subject to ordinary
brokerage commissions and charges.

 .  The Trust Issues and Redeems DIAMONDS in "Creation Units"

   The Trust issues and redeems DIAMONDS only in specified large lots of 50,000
DIAMONDS or multiples thereof referred to as "Creation Units." Creation Units
are issued by the Trust to anyone who, after placing a creation order with ALPS
Distributors, Inc. ("Distributor"), deposits with the Trustee a specified
portfolio of Index Securities and a cash payment generally equal to dividends
(net of expenses) accumulated up to the time of deposit.

   Fractional Creation Units may be created or redeemed only in limited
circumstances.* Creation Units are redeemable in kind only and are not
redeemable for cash. Upon receipt of one or more Creation Units, the Trust
delivers to the redeeming holder a portfolio of Index Securities (based on NAV
of the Trust), together with a cash payment. Each redemption has to be
accompanied by a Cash Redemption Payment that on any given Business Day is an
amount identical to the Cash Component of a Portfolio Deposit.

   If the Trustee determines that one or more Index Securities are likely to be
unavailable, or available in insufficient quantity, for delivery upon creation
of Creation Units, the Trustee may permit the cash equivalent value of one or
more of these Index Securities to be included in the Portfolio Deposit as a
part of the Cash Component in lieu thereof. If a creator is restricted by
regulation or otherwise from investing or engaging in a transaction in one or
more Index Securities, the Trustee may permit the cash equivalent value of such
Index Securities to be included in the Portfolio Deposit based on the market
value of such Index Securities as of the Evaluation Time on the date such
creation order is deemed received by the Distributor as part of the Cash
Component in lieu of the inclusion of such Index Securities in the stock
portion of the
--------
* See the discussion of termination of the Trust in this Summary and "Dividend
  Reinvestment Service," however, for a description of the circumstances in
  which DIAMONDS may be redeemed or created by the Trustee in less than a
  Creation Unit size aggregation of 50,000 DIAMONDS.

                                      4

<PAGE>

Portfolio Deposit. If the Trustee determines that one or more Index Securities
are likely to be unavailable or available in insufficient quantity for delivery
by the Trust upon the redemption of Creation Units, the Trustee may deliver the
cash equivalent value of one or more of these Index Securities, based on their
market value as of the Evaluation Time on the date the redemption order is
deemed received by the Trustee, as part of the Cash Redemption Payment in lieu
thereof.

 .  Creation Orders Must be Placed with the Distributor

   All orders to create Creation Units must be placed with the Distributor. To
be eligible to place these orders, an entity or person must be (a) a
"Participating Party," or (b) a DTC Participant, and in each case must have
executed an agreement with the Distributor and the Trustee ("Participant
Agreement"). The term "Participating Party" means a broker-dealer or other
participant in the DIAMONDS Clearing Process, through the Continuous Net
Settlement ("CNS") System of the National Securities Clearing Corporation
("NSCC"), a clearing agency registered with the Securities and Exchange
Commission ("SEC"). Payment for orders is made by deposits with the Trustee of
a portfolio of securities, substantially similar in composition and weighting
to Index Securities, and a cash payment in an amount equal to the Dividend
Equivalent Payment, plus or minus the Balancing Amount. "Dividend Equivalent
Payment" is an amount equal, on a per Creation Unit basis, to the dividends on
the Portfolio (with ex-dividend dates within the accumulation period), net of
expenses and accrued liabilities for such period (including, without
limitation, (i) taxes or other governmental charges against the Trust not
previously deducted, if any, and (ii) accrued fees of the Trustee and other
expenses of the Trust (including legal and auditing expenses) and other
expenses not previously deducted), calculated as if all of the Portfolio
Securities had been held for the entire accumulation period for such
distribution. The Dividend Equivalent Payment and the Balancing Amount
collectively are referred to as "Cash Component" and the deposit of a portfolio
of securities and the Cash Component collectively are referred to as a
"Portfolio Deposit." Persons placing creation orders with the Distributor must
deposit Portfolio Deposits either (i) through the CNS clearing process of NSCC,
as such processes have been enhanced to effect creations and redemptions of
Creation Units, such processes referred to herein as the "DIAMONDS Clearing
Process," or (ii) with the Trustee outside the DIAMONDS Clearing Process (i.e.
through the facilities of DTC).

   The Distributor acts as underwriter of DIAMONDS on an agency basis. The
Distributor maintains records of the orders placed with it and the
confirmations of acceptance and furnishes to those placing such orders
confirmations of acceptance of the orders. The Distributor also is responsible
for delivering a prospectus to persons creating DIAMONDS. The Distributor also
maintains a record of the delivery instructions in response to orders and may
provide certain other administrative services, such as those related to state
securities law compliance. The Distributor is a

                                      5

<PAGE>

corporation organized under the laws of the State of Colorado and is located at
370 17th Street, Suite 3100, Denver, CO 80202. The Distributor is a registered
broker-dealer and a member of the National Association of Securities Dealers,
Inc. PDR Services LLC, as Sponsor of the Trust, pays the Distributor for its
services a flat annual fee. The Sponsor will not seek reimbursement for such
payment from the Trust without obtaining prior exemptive relief from the SEC.

 .  Expenses of the Trust

   The expenses of the Trust are accrued daily and reflected in the NAV of the
Trust. After reflecting waivers but before reflecting credits, the Trust
currently is accruing ordinary operating expenses at an annual rate of 0.1800%.

        Estimated Trust Annual Ordinary Operating Expenses

<TABLE>
<CAPTION>
                                                        As a % of
                                                     Trust Net Assets
                                                     ----------------
           <S>                                       <C>
           Current Trust Annual Ordinary
             Operating Expenses
           Trustee's Fee                                  0.0792 %
           Dow Jones License Fee                          0.0416 %
           Registration Fees                              0.0056 %
           Marketing                                      0.0371 %
           Other Operating Expenses                       0.0165 %
                                                         -------
            Total:                                        0.1800 %
           Sponsor Waiver*                               (0.0000)%
                                                         -------
           Net Expense After Waiver                       0.1800 %

           Trustee Reduction for Balance Credits*        (0.0033)%
                                                         -------
           Net Expenses after Waivers and Reductions      0.1767 %
                                                         =======
</TABLE>

   Future expense accruals will depend primarily on the level of the Trust's
net assets and the level of expenses.

--------
* For fiscal year 2001, the ordinary operating expenses of the Trust were not
  permitted to exceed 0.1800% of the Trust's daily net asset value because the
  Sponsor voluntarily reimbursed the Trust for all ordinary operating expenses
  in excess of such amount. The Sponsor reserves the right to discontinue this
  reimbursement policy in the future. Therefore, there is no guarantee that the
  Trust's ordinary operating expenses will not exceed 0.1800% of the Trust's
  daily net asset value. Trust expenses are further reduced by a Trustee's
  earnings credit of 0.0033% of the Portfolio's daily NAV as a result of
  uninvested cash balances in the Trust.

                                      6

<PAGE>

 .  A Transaction Fee is Payable for Each Creation and for Each Redemption of
   Creation Units

   A transaction fee payable to the Trustee in connection with each creation
and redemption of Creation Units made through the DIAMONDS Clearing Process
("Transaction Fee") is non-refundable, regardless of the NAV of the Trust. This
Transaction Fee is $1,000 per Participating Party per day, regardless of the
number of Creation Units created or redeemed on such day. The $1,000 charge is
subject to a limit not to exceed 10/100 of one percent (10 basis points) of the
value of one Creation Unit at the time of creation ("10 Basis Point Limit").

   For creations and redemptions outside the DIAMONDS Clearing Process, an
additional amount not to exceed three (3) times the Transaction Fee applicable
for one Creation Unit is charged per Creation Unit per day. Under the current
schedule, therefore, the total fee charged in connection with creation or
redemption outside the DIAMONDS Clearing Process would be $1,000 (the
Transaction Fee for the creation or redemption of one Creation Unit) plus an
additional amount up to $3,000 (3 times $1,000), for a total not to exceed
$4,000. Creators and redeemers restricted from engaging in transactions in one
or more Index Securities may pay the Trustee the Transaction Fee and may pay an
additional amount per Creation Unit not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit.

 .  DIAMONDS are Held in Book Entry Form Only

   The Depository Trust Company ("DTC") or its nominee is the record or
registered owner of all outstanding DIAMONDS. Beneficial ownership of DIAMONDS
is shown on the records of the DTC or its participants. Individual certificates
are not issued for DIAMONDS. See "The Trust--Securities Depository;
Book-Entry-Only System."

 .  DIAMONDS Make Periodic Dividend Payments

   DIAMONDS holders receive each calendar month an amount corresponding to the
amount of any cash dividends declared on the Portfolio Securities during the
applicable period, net of fees and expenses associated with operation of the
Trust, and taxes, if applicable. Because of such fees and expenses, the
dividend yield for DIAMONDS is ordinarily less than that of the DJIA. Investors
should consult their tax advisors regarding tax consequences associated with
Trust dividends, as well as those associated with DIAMONDS sales or redemptions.

   Monthly distributions based on the amount of dividends payable with respect
to Portfolio Securities and other income received by the Trust, net of fees and
expenses, and taxes, if applicable, are made via DTC and its participants to
Beneficial Owners

                                      7

<PAGE>

on each Dividend Payment Date. Any capital gain income recognized by the Trust
in any taxable year that is not previously treated as distributed during the
year ordinarily is to be distributed at least annually in January of the
following taxable year. The Trust may make additional distributions shortly
after the end of the year in order to satisfy certain distribution requirements
imposed by the Internal Revenue Code of 1986, as amended ("Code"). Although all
income distributions are currently made monthly, the Trustee may vary the
periodicity with which distributions are made. Those Beneficial Owners
interested in reinvesting their monthly distributions may participate through
DTC Participants in the DTC Dividend Reinvestment Service ("Service") available
through certain brokers. See "The Trust--Securities Depository; Book-Entry-Only
System."

 .  The Trust Intends to Qualify as a Regulated Investment Company

   For the fiscal year ended October 31, 2001, the Trust believes that it
qualified for tax treatment as a "regulated investment company" under
Subchapter M of the Code. The Trust intends to continue to so qualify and to
distribute annually its entire investment company taxable income and net
capital gain. Distributions that are taxable as ordinary income to Beneficial
Owners generally are expected to constitute dividend income for federal income
tax purposes and to be eligible for the dividends-received deduction available
to many corporations to the extent of qualifying dividend income received by
the Trust. The Trust's regular monthly distributions are based on the dividend
performance of the Portfolio during such monthly distribution period rather
than the actual taxable income of the Trust. As a result, a portion of the
distributions of the Trust may be treated as a return of capital or a capital
gain dividend for federal income tax purposes or the Trust may be required to
make additional distributions to maintain its status as a regulated investment
company or to avoid imposition of income or excise taxes on undistributed
income.

 .  Termination of the Trust

   The Trust has a specified lifetime term. The Trust is scheduled to terminate
on the first to occur of (a) January 13, 2123 or (b) the date 20 years after
the death of the last survivor of fifteen persons named in the Trust Agreement,
the oldest of whom was born in 1994 and the youngest of whom was born in 1997.
Upon termination, the Trust may be liquidated and pro rata share of the assets
of the Trust, net of certain fees and expenses, distributed to holders of
DIAMONDS.

 .  Purchases of DIAMONDS by Registered Investment Companies

   Purchases of DIAMONDS by registered investment companies are subject to
restrictions set forth in Section 12(d)(1) of the Investment Company Act of
1940.

                                      8

<PAGE>

                                 Risk Factors

   Investors can lose money by investing in DIAMONDS. Investors should
carefully consider the risk factors described below together with all of the
other information included in this Prospectus before deciding to invest in
DIAMONDS.

Investment in the Trust involves the risks inherent in an investment in any
equity security. An investment in the Trust is subject to the risks of any
investment in a portfolio of large-capitalization common stocks, including the
risk that the general level of stock prices may decline, thereby adversely
affecting the value of such investment. The value of Portfolio Securities may
fluctuate in accordance with changes in the financial condition of the issuers
of Portfolio Securities (particularly those that are heavily weighted in the
DJIA), the value of common stocks generally and other factors. The identity and
weighting of Index Securities and the Portfolio Securities also change from
time to time.

   The financial condition of the issuers may become impaired or the general
condition of the stock market may deteriorate (either of which may cause a
decrease in the value of the Portfolio and thus in the value of DIAMONDS).
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic and
banking crises.

   Holders of common stocks of any given issuer incur more risk than holders of
preferred stocks and debt obligations of the issuer because the rights of
common stockholders, as owners of the issuer, generally are inferior to the
rights of creditors of, or holders of debt obligations or preferred stocks
issued by, such issuer. Further, unlike debt securities that typically have a
stated principal amount payable at maturity, or preferred stocks that typically
have a liquidation preference and may have stated optional or mandatory
redemption provisions, common stocks have neither a fixed principal amount nor
a maturity. Common stock values are subject to market fluctuations as long as
the common stock remains outstanding. The value of the Portfolio may be
expected to fluctuate over the entire life of the Trust.

   There can be no assurance that the issuers of Portfolio Securities will pay
dividends. Distributions generally depend upon the declaration of dividends by
the issuers of Portfolio Securities and the declaration of such dividends
generally depends upon various factors, including the financial condition of
the issuers and general economic conditions.

                                      9

<PAGE>

The Trust is not actively managed. The Trust is not actively "managed" by
traditional methods, and therefore the adverse financial condition of an issuer
will not result in the elimination of its stocks from the Portfolio unless the
stocks of such issuer are removed from the DJIA.

A liquid trading market for certain Portfolio Securities may not exist.
Although most of Portfolio Securities are listed on a national securities
exchange, the principal trading market for some may be in the over-the-counter
market. The existence of a liquid trading market for certain Portfolio
Securities may depend on whether dealers will make a market in such stocks.
There can be no assurance that a market will be made for any of Portfolio
Securities, that any market will be maintained or that any such market will be
or remain liquid. The price at which Portfolio Securities may be sold and the
value of the Portfolio will be adversely affected if trading markets for
Portfolio Securities are limited or absent.

The Trust may not always be able exactly to replicate the performance of the
DJIA. The Trust is not able to replicate exactly the performance of the DJIA
because the total return generated by the Portfolio is reduced by Trust
expenses and transaction costs incurred in adjusting the actual balance of the
Portfolio. It is also possible that, for a short period, the Trust may not
fully replicate the performance of the DJIA due to the temporary unavailability
of certain Index Securities in the secondary market or due to other
extraordinary circumstances.

Investment in the Trust may have adverse tax consequences. Investors in the
Trust should also be aware that there are tax consequences associated with the
ownership of DIAMONDS resulting from the distribution of Trust dividends and
sales of DIAMONDS as well as under certain circumstances the sales of stocks
held by the Trust in connection with redemptions.

NAV may not always correspond to market price. The NAV of DIAMONDS in Creation
Unit size aggregations and, proportionately, the NAV per DIAMONDS unit, changes
as fluctuations occur in the market value of Portfolio Securities. Investors
should be aware that the aggregate public trading market price of 50,000
DIAMONDS may be different from the NAV of a Creation Unit (i.e., 50,000
DIAMONDS may trade at a premium over, or at a discount to, the NAV of a
Creation Unit) and similarly the public trading market price per DIAMONDS unit
may be different from the NAV of a Creation Unit on a per DIAMONDS unit basis.
This price difference may be due, in large part, to the fact that supply and
demand forces at work in the secondary trading market for DIAMONDS is closely
related to, but not identical to, the same forces influencing the prices of
Index Securities trading individually or in the aggregate at any point in time.
Investors also should note that the size of the Trust in terms of total assets
held may change substantially over time and from time to time as Creation Units
are created and redeemed.

                                      10

<PAGE>

The Exchange may halt trading in DIAMONDS. DIAMONDS are listed for trading on
the Exchange under the market symbol DIA. Trading in DIAMONDS may be halted due
to market conditions or, in light of Exchange rules and procedures, for reasons
that, in the view of the Exchange, make trading in DIAMONDS inadvisable. In
addition, trading is subject to trading halts caused by extraordinary market
volatility pursuant to Exchange "circuit breaker" rules that require trading to
be halted for a specified period based on a specified market decline. There can
be no assurance that the requirements of the Exchange necessary to maintain the
listing of DIAMONDS will continue to be met or will remain unchanged. The Trust
will be terminated if DIAMONDS are delisted from the Exchange.

DIAMONDS are subject to market risks. DIAMONDS are subject to the risks other
than those inherent in an investment in equity securities, discussed above, in
that the selection of the stocks included in the Portfolio, the expenses
associated with the Trust, or other factors distinguishing an ownership
interest in a trust from the direct ownership of a portfolio of stocks may
affect trading in DIAMONDS.

   Additionally, DIAMONDS may perform differently than other investments in
portfolios containing large capitalization stocks based upon or derived from an
index other than the DJIA. For example, the great majority of component stocks
of the DJIA are drawn from among the largest of the large capitalization
universe, while other indexes may represent a broader sampling of large
capitalization stocks. Also, other indexes may use different methods for
assigning relative weights to the index components than the price weighted
method used by the DJIA. As a result, DJIA accords relatively more weight to
stocks with a higher price to market capitalization ratio than a similar market
capitalization weighted index.

The regular settlement period for Creation Units may be reduced. Except as
otherwise specifically noted, the time frames for delivery of stocks, cash, or
DIAMONDS in connection with creation and redemption activity within the
DIAMONDS Clearing Process are based on NSCC's current "regular way" settlement
period of three (3) days during which NSCC is open for business (each such day
an "NSCC Business Day"). NSCC may, in the future, reduce such "regular way"
settlement period, in which case there may be a corresponding reduction in
settlement periods applicable to DIAMONDS creations and redemptions.

Clearing and settlement of Creation Units may be delayed or fail. The Trustee
delivers a portfolio of stocks for each Creation Unit delivered for redemption
substantially identical in weighting and composition to the stock portion of a
Portfolio Deposit as in effect on the date the request for redemption is deemed
received by the Trustee. If redemption is processed through the DIAMONDS
Clearing Process, the stocks that are not delivered are covered by NSCC's
guarantee of the completion of such delivery. Any stocks not received on
settlement date are marked-to-market until

                                      11

<PAGE>

delivery is completed. The Trust, to the extent it has not already done so,
remains obligated to deliver the stocks to NSCC, and the market risk of any
increase in the value of the stocks until delivery is made by the Trust to NSCC
could adversely affect the NAV of the Trust. Investors should note that the
stocks to be delivered to a redeemer submitting a redemption request outside of
the DIAMONDS Clearing Process that are not delivered to such redeemer are not
covered by NSCC's guarantee of completion of delivery.

                                      12

<PAGE>

DIAMONDS Trust Series 1
Report of Independent Accountants
--------------------------------------------------------------------------------

To the Trustee and Unitholders of
DIAMONDS Trust Series 1

   In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of DIAMONDS Trust Series 1 (the
"Trust") at October 31, 2001, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 2001 by
correspondence with the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, Massachusetts
December 14, 2001

                                      13

<PAGE>

DIAMONDS Trust Series 1
Statement of Assets and Liabilities
October 31, 2001

--------------------------------------------------------------------------------

<TABLE>
   <S>                                                        <C>
   Assets
      Investments in securities, at value.................... $2,730,117,065
      Cash...................................................      7,359,475
      Receivable for DIAMONDS issued in-kind.................          9,712
      Dividends receivable...................................      2,528,558
      Deferred organization costs............................        604,095
                                                              --------------
   Total Assets..............................................  2,740,618,905
                                                              ==============
   Liabilities
      Payable for income delivered for DIAMONDS redeemed in-
        kind.................................................          8,995
      Distribution payable...................................      2,874,369
      Due to Sponsor.........................................      1,867,897
      Accrued Trustee fees...................................        170,960
      Accrued expenses and other liabilities.................      1,220,276
                                                              --------------
   Total Liabilities.........................................      6,142,497
                                                              --------------
   Net Assets................................................
                                                              $2,734,476,408
                                                              ==============
   Net Assets Represented by:
      Paid in surplus........................................ $3,571,120,026
      Distribution in excess of net investment income........     (1,277,005)
      Accumulated net realized loss on investments...........    (21,520,981)
      Net unrealized depreciation on investments.............   (813,845,632)
                                                              --------------
   Net Assets................................................ $2,734,476,408
                                                              ==============
   Net asset value per DIAMOND............................... $        90.84
                                                              ==============
   Units of fractional undivided interest ("DIAMONDS")
     outstanding, unlimited units authorized.................     30,101,813
                                                              --------------
   Cost of investments....................................... $3,543,962,697
                                                              --------------
</TABLE>

See accompanying notes to financial statements.

                                      14

<PAGE>

DIAMONDS Trust Series 1
Statements of Operations
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                    For the year   For the year   For the year
                                       ended          ended          ended
                                    October 31,    October 31,    October 31,
                                        2001           2000           1999
                                    -------------  -------------  ------------
<S>                                 <C>            <C>            <C>
Investment Income
   Dividend income................. $  41,997,410  $  27,110,365  $  9,701,986
                                    -------------  -------------  ------------
Expenses:
   Trustee expense.................     1,858,460      1,677,261       912,453
   DJIA license fee................     1,300,000      1,000,000     1,000,000
   Amortization of organization
     costs.........................       502,266        503,642       502,266
   Marketing expense...............       356,933      2,800,000       712,625
   SEC registration expense........       286,213        235,534       152,003
   Printing and postage expense....       136,463        162,000       154,540
   Legal and audit services........        49,800         56,389        39,097
   Miscellaneous expense...........           218            700         1,280
                                    -------------  -------------  ------------
Total expenses.....................     4,490,353      6,435,526     3,474,264
   Rebate from Sponsor.............            --     (2,597,968)   (1,418,867)
   Rebate from Trustee.............            --       (599,740)     (912,453)
                                    -------------  -------------  ------------
Net expenses.......................     4,490,353      3,237,818     1,142,944
   Trustee earnings credit.........      (160,833)      (133,506)      (22,000)
                                    -------------  -------------  ------------
Net expenses after Trustee earnings
  credit...........................     4,329,520      3,104,312     1,120,944
                                    -------------  -------------  ------------
Net Investment Income..............    37,667,890     24,006,053     8,581,042
                                    -------------  -------------  ------------
Realized and Unrealized Gain
  (Loss) on Investments
   Net realized gain on
     investment transactions.......   218,849,002    189,376,879   115,756,556
   Net increase in unrealized
     depreciation..................  (681,232,614)  (119,522,465)   (7,307,187)
                                    -------------  -------------  ------------
Net Realized and Unrealized Gain
  (Loss) on Investments............  (462,383,612)    69,854,414   108,449,369
                                    -------------  -------------  ------------
Net Increase (Decrease) in Net
  Assets from Operations........... $(424,715,722) $  93,860,467  $117,030,411
                                    =============  =============  ============
</TABLE>

See accompanying notes to financial statements.

                                      15

<PAGE>


DIAMONDS Trust Series 1
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
                                           For the year    For the year    For the year
                                              ended           ended           ended
                                           October 31,     October 31,     October 31,
                                               2001            2000            1999
                                          --------------  --------------  --------------
<S>                                       <C>             <C>             <C>
Increase (decrease) in net assets
 resulting from operations:
    Net investment income................ $   37,667,890  $   24,006,053  $    8,581,042
    Net realized gain on investment
     transactions........................    218,849,002     189,376,879     115,756,556
    Net increase in unrealized
     depreciation........................   (681,232,614)   (119,522,465)     (7,307,187)
                                          --------------  --------------  --------------
Net increase (decrease) in net assets
 resulting from operations...............   (424,715,722)     93,860,467     117,030,411
                                          --------------  --------------  --------------
Undistributed net investment income
 included in price of units issued and
 redeemed, net...........................        733,997          63,116         459,889
                                          --------------  --------------  --------------
Distributions to unitholders from:
    Net investment income................    (37,667,890)    (24,006,053)     (8,581,042)
    In excess of net investment income...       (552,558)       (411,609)       (262,907)
                                          --------------  --------------  --------------
Total distributions to unitholders.......    (38,220,448)    (24,417,662)     (8,843,949)
                                          --------------  --------------  --------------
Net increase in net assets from
 issuance and redemption of
 DIAMONDS................................  1,194,073,126     892,111,223     575,660,769
                                          --------------  --------------  --------------
Net increase in net assets during
 period..................................    731,870,953     961,617,144     684,307,120
Net assets at beginning of period........  2,002,605,455   1,040,988,311     356,681,191
                                          --------------  --------------  --------------
Net assets end of period*................ $2,734,476,408  $2,002,605,455  $1,040,988,311
                                          ==============  ==============  ==============
* Includes distributions in excess of
 net investment income................... $   (1,277,005) $     (724,447) $     (366,116)
                                          --------------  --------------  --------------
</TABLE>

See accompanying notes to financial statements.

                                      16

<PAGE>

DIAMONDS Trust Series 1
Financial Highlights
Selected data for a DIAMOND outstanding during the period
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                      For the year   For the year   For the year     For the
                                          ended          ended          ended     period ended
                                      10/31/2001(5)  10/31/2000(5)  10/31/1999(5) 10/31/1998(1)
                                      -------------  -------------  ------------- -------------
<S>                                   <C>            <C>            <C>           <C>
Net asset value, beginning
 of period...........................  $   109.73     $   107.31     $    85.94     $  77.32
                                       ----------     ----------     ----------     --------
Investment operations:
   Net investment income.............        1.56           1.43           1.41         0.98
   Net realized and unrealized gain
    (loss) on investments............      (18.86)          2.47          21.36         8.59
                                       ----------     ----------     ----------     --------

Total from investment operations.....      (17.30)          3.90          22.77         9.57
                                       ----------     ----------     ----------     --------

Undistributed net investment
 income included in price of units
 issued and redeemed, net............        0.00(6)        0.00(6)        0.08         0.05
                                       ----------     ----------     ----------     --------

Less distributions from:
   Net investment income.............       (1.56)         (1.43)         (1.41)       (0.98)
   In excess of net investment
    income...........................       (0.03)         (0.05)         (0.07)       (0.02)
                                       ----------     ----------     ----------     --------
Total distributions..................       (1.59)         (1.48)         (1.48)       (1.00)
                                       ----------     ----------     ----------     --------

Net asset value, end of period.......  $    90.84     $   109.73     $   107.31     $  85.94
                                       ==========     ==========     ==========     ========

Total investment return (4)..........      (15.91)%         3.68%         26.71%       12.44%

Ratios and supplemental data
Ratios to average net assets:
  Net investment income..............        1.51%          1.34%          1.37%        1.49%(2)
  Total expenses.....................        0.17%          0.17%          0.18%        0.18%(2)
  Total expenses excluding trustee
   earnings credit...................        0.18%          0.18%          0.18%        0.18%(2)
  Total expenses excluding rebates,
   trustee earnings credit and
   waivers (7).......................        0.18%          0.36%          0.37%        2.35%(2)
  Portfolio turnover rate (3)........       12.66%         23.85%         34.70%        3.23%

Net asset value, end of period
 (000's).............................  $2,734,476     $2,002,605     $1,040,988     $356,681
</TABLE>
--------
(1) The Trust commenced operations on January 14, 1998.
(2) Annualized.
(3) Portfolio turnover ratio excludes securities received or delivered from
    processing creations or redemptions of DIAMONDS.
(4) Total returns for periods of less than one year are not annualized and do
    not include transaction fees.
(5) Per share numbers have been calculated using the average shares method,
    which more appropriately presents the per share data for the period.
(6) Amount shown represents less than $0.01.
(7) Excludes expenses reimbursed by the Sponsor and Trustee from the period
    January 14, 1998 through February 29, 2000 and the Sponsor from the period
    March 1, 2000 through October 31, 2000.

See accompanying notes to financial statements.

                                      17

<PAGE>

DIAMONDS Trust Series I
Notes to Financial Statements (continued)
October 31, 2001
--------------------------------------------------------------------------------

Note 1--Organization

   DIAMONDS Trust Series 1 (the "Trust") is a unit investment trust created
under the laws of the State of New York and registered under the Investment
Company Act of 1940. The Trust was created to provide investors with the
opportunity to purchase units of beneficial interest in the Trust representing
proportionate undivided interests in the portfolio of securities consisting of
substantially all of the component common stocks, which comprise the Dow Jones
Industrial Average (the "DJIA"). Each unit of fractional undivided interest in
the Trust is referred to as a "DIAMONDS Unit". The Trust commenced operations
on January 14, 1998 upon the initial issuance of 500,000 DIAMONDS (equivalent
to ten "Creation Units"--see Note 4) in exchange for a portfolio of securities
assembled to reflect the intended portfolio composition of the Trust.

Note 2--Significant Accounting Policies

   The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that effect the reported amounts
and disclosures in the financial statements. Actual results could differ from
these estimates. The following is a summary of significant accounting policies
followed by the Trust.

Security Valuation

   Portfolio securities are valued based on the closing sale price on the
exchange which is deemed to be the principal market for the security. If no
closing sale price is available, then the security is valued at the previous
closing sale price on the exchange which is deemed to be the principal market
for the security. If there is no closing sale price available, valuation will
be determined by the Trustee in good faith based on available information.

Investment Transactions

   Investment transactions are recorded on the trade date. Realized gains and
losses from the sale or disposition of securities are recorded on the
identified cost basis. Dividend income is recorded on the ex-dividend date.


                                      18

<PAGE>

DIAMONDS Trust Series I
Notes to Financial Statements (continued)
October 31, 2001
--------------------------------------------------------------------------------

Distributions to Unitholders

   The Trust declares and distributes dividends from net investment income to
its unitholders monthly. The Trust will distribute net realized capital gains,
if any, at least annually.

Organization Costs

   The Trust incurred organization costs of $2,307,929, which have been
capitalized and are being charged to operations ratably over a period of 60
months.

Federal Income Tax

   The Trust has qualified and intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended.
By so qualifying and electing, the Trust will not be subject to federal income
taxes to the extent it distributes its taxable income, including any net
realized capital gains, for each fiscal year. In addition, by distributing
during each calendar year substantially all of its net investment income and
capital gains, if any, the Trust will not be subject to federal excise tax.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for income
equalization, in-kind transactions and losses deferred due to wash sales. Net
investment income per share calculations in the financial highlights for all
years presented exclude these differences. During the fiscal year ended October
31, 2001, the Trust reclassified $210,774,140 of non-taxable security gains
realized in the in-kind redemption of Creation Units (Note 4) as an increase to
paid in surplus in the Statements of Assets and Liabilities. The Trust incurred
net capital losses of $9,197,094 for the fiscal period ended October 31, 1999
and $11,386,433 for the fiscal year ended October 31, 2000. These losses may be
utilized to offset any net realized capital gains through October 31, 2007 and
October 31, 2008, respectively.

Note 3--Transactions with the Trustee and Sponsor

   In accordance with the Trust Agreement, State Street Bank and Trust Company
(the "Trustee") maintains the Trust's accounting records, acts as custodian and
transfer agent to the Trust, and provides administrative services, including
filing of all required regulatory reports. The Trustee is also responsible for
determining the composition of the portfolio of securities which must be
delivered and/or received in

                                      19

<PAGE>

DIAMONDS Trust Series I
Notes to Financial Statements (continued)
October 31, 2001
--------------------------------------------------------------------------------

Note 3--Transactions with the Trustee and Sponsor (continued)

exchange for the issuance and/or redemption of Creation Units of the Trust, and
for adjusting the composition of the Trust's portfolio from time to time to
conform to changes in the composition and/or weighting structure of the DJIA.
For these services, the Trustee received a fee at the following annual rates
for the year ended October 31, 2001:

<TABLE>
<CAPTION>
Net asset value of the Trust  Fee as a percentage of net asset value of the Trust
----------------------------  ---------------------------------------------------
<S>                           <C>
 $0--$499,999,999                  10/100 of 1% per annum plus or minus the
                                     Adjustment Amount
 $500,000,000--                    8/100 of 1% per annum plus or minus the
 $2,499,999,999                      Adjustment Amount
 $2,500,000,000--and above         6/100 of 1% per annum plus or minus the
                                     Adjustment Amount
</TABLE>

   The Adjustment Amount is the sum of (a) the excess or deficiency of
transaction fees received by the Trustee, less the expenses incurred in
processing orders for creation and redemption of DIAMONDS and (b) the amounts
earned by the Trustee with respect to the cash held by the Trustee for the
benefit of the Trust. During the year ended October 31, 2001, the Adjustment
Amount decreased the Trustee's fee by $398,026. The Adjustment Amount included
an excess of net transaction fees from processing orders of $237,193 and a
Trustee earnings credit of $160,833.

   PDR Services LLC (the "Sponsor", a wholly-owned subsidiary of the American
Stock Exchange LLC) agreed to reimburse the Trust for, or assume, the ordinary
operating expenses of the Trust which exceeded 18.00/100 of 1% per annum of the
daily net asset value of the Trust. The amounts of such reimbursements by the
Sponsor for the fiscal years ended October 31, 1999, October 31, 2000, and
October 31, 2001 were $1,418,867, $2,597,968, and $0 respectively. From the
period November 1, 1998 through February 29, 2000, State Street Bank and Trust
Company (the "Trustee") agreed to waive the Trustee's fee. The amounts of such
waivers by the Trustee for the fiscal years ended October 31, 1999, and October
31, 2000 were $912,453 and $599,740 respectively.

   Dow Jones & Company, Inc. ("Dow Jones"), the American Stock Exchange LLC
(the "AMEX"), and PDR Services (the "Sponsor") have entered into a License
Agreement pursuant to which certain Dow Jones marks may be used in connection
with the Trust subject to the payment of license fees.


                                      20

<PAGE>

DIAMONDS Trust Series I
Notes to Financial Statements (continued)
October 31, 2001
--------------------------------------------------------------------------------

Note 4--Trust Transactions in DIAMONDS
Transactions in DIAMONDS were as follows.

<TABLE>
<CAPTION>
                                                        Year Ended
                                                     October 31, 2001
                                               ----------------------------
                                                DIAMONDS        Amounts
                                               -----------  ---------------
    <S>                                        <C>          <C>
    DIAMONDS sold.............................  76,050,000  $ 7,610,021,285
    DIAMONDS issued upon dividend reinvestment       1,055          107,143
    DIAMONDS redeemed......................... (64,200,000)  (6,415,321,305)
    Net income equalization...................          --         (733,997)
                                               -----------  ---------------
    Net Increase..............................  11,851,055  $ 1,194,073,126
                                               ===========  ===============
</TABLE>

<TABLE>
<CAPTION>
                                                        Year Ended
                                                     October 31, 2000
                                               ---------------------------
                                                DIAMONDS       Amounts
                                               -----------  --------------
    <S>                                        <C>          <C>
    DIAMONDS sold.............................  30,350,000  $ 3,242,757,41
    DIAMONDS issued upon dividend reinvestment         378          40,754
    DIAMONDS redeemed......................... (21,800,000)  (2,350,623,90)
    Net income equalization...................          --         (63,116)
                                               -----------  --------------
    Net Increase..............................   8,550,378  $  892,111,223
                                               ===========  ==============
</TABLE>

<TABLE>
<CAPTION>
                                                        Year Ended
                                                     October 31, 1999
                                               ----------------------------
                                                DIAMONDS        Amounts
                                               -----------  ---------------
    <S>                                        <C>          <C>
    DIAMONDS sold.............................  17,200,000  $ 1,822,509,789
    DIAMONDS issued upon dividend reinvestment         194           19,408
    DIAMONDS redeemed......................... (11,650,000)  (1,246,408,539)
    Net income equalization...................          --         (459,889)
                                               -----------  ---------------
    Net Increase..............................   5,550,194  $   575,660,769
                                               ===========  ===============
</TABLE>

   Except for under the Trust's dividend reinvestment plan, DIAMONDS are issued
and redeemed by the Trust only in Creation Unit size aggregations of 50,000
DIAMONDS. Such transactions are only permitted on an in-kind basis, with a
separate cash payment which is equivalent to the undistributed net investment
income per DIAMOND (income equalization) and a balancing cash component to
equate the

                                      21

<PAGE>

transaction to the net asset value per unit of the Trust on the transaction
date. A transaction fee of $1,000 is charged in connection with each creation
or redemption of Creation Units through the DIAMONDS Clearing Process per
Participating party per day, regardless of the number of Creation Units created
or redeemed. Transaction fees are received by the Trustee and used to offset
the expense of processing orders.

Note 5--Investment Transactions

   For the fiscal year ended October 31, 2001, the Trust had net in-kind
contributions, net in-kind redemptions, purchases and sales of investment
securities of $5,484,539,005, $4,290,802,303, $313,919,767 and $316,843,758,
respectively. At October 31, 2001, the cost of investments for federal income
tax purposes was $3,544,900,150 accordingly, gross unrealized appreciation was
$8,581,821, and gross unrealized depreciation was $823,364,906, resulting in
net unrealized depreciation of $814,783,085.

Note 6--Tax Information (Unaudited)

   For Federal income tax purposes, the percentage of Trust ordinary
distributions which qualify for the corporate dividends received deduction for
the fiscal year ended October 31, 2001 is 100%.



                                      22

<PAGE>

DIAMONDS Trust Series 1
Schedule of Investments
October 31, 2001
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
Common Stocks                             Shares       Value
-------------                            --------- --------------
<S>                                      <C>       <C>
AT & T Corp............................. 2,081,580 $   31,744,095
Alcoa, Inc.............................. 2,081,580     67,172,586
American Express Co..................... 2,081,580     61,260,899
Boeing Co............................... 2,081,580     67,859,508
Caterpillar, Inc........................ 2,081,580     93,088,258
Citigroup, Inc.......................... 2,081,580     94,753,522
Coca-Cola Co............................ 2,081,580     99,666,050
Disney (Walt) Co........................ 2,081,580     38,696,572
Du Pont (E.I.) de Nemours & Co., Inc.... 2,081,580     83,242,384
Eastman Kodak Co........................ 2,081,580     53,226,001
Exxon Mobil Corp........................ 2,081,580     82,118,331
General Electric Co..................... 2,081,580     75,790,328
General Motors Corp..................... 2,081,580     86,010,886
Hewlett-Packard Co...................... 2,081,580     35,032,991
Home Depot, Inc......................... 2,081,580     79,578,803
Honeywell International, Inc............ 2,081,580     61,510,689
Intel Corp.............................. 2,081,580     50,832,184
International Business Machines Corp.... 2,081,580    224,956,351
International Paper Co.................. 2,081,580     74,520,564
Johnson & Johnson....................... 2,081,580    120,544,298
Morgan (J.P.) & Co., Inc................ 2,081,580     73,604,669
McDonald's Corp......................... 2,081,580     54,266,791
Merck & Co., Inc........................ 2,081,580    132,825,620
Microsoft Corp.*........................ 2,081,580    121,043,877
Minnesota Mining & Manufacturing Co..... 2,081,580    217,275,320
Philip Morris Companies, Inc............ 2,081,580     97,417,944
Procter & Gamble Co..................... 2,081,580    153,578,972
SBC Communications, Inc................. 2,081,580     79,329,014
United Technologies Corp................ 2,081,580    112,176,346
Wal-Mart Stores, Inc.................... 2,081,580    106,993,212
                                                   --------------
Total Investments--(Cost $3,543,962,697)           $2,730,117,065
                                                   ==============
</TABLE>
--------
*  Denotes non-income producing security

See accompanying notes to financial statements

                                      23

<PAGE>

                                   THE TRUST

   The Trust, an exchange traded fund or "ETF", is a registered investment
company which both (a) continuously issues and redeems "in-kind" its shares,
known as DIAMONDS, only in large lot sizes called Creation Units at their
once-daily NAV and (b) lists DIAMONDS individually for trading on the American
Stock Exchange at prices established throughout the trading day, like any other
listed equity security trading in the secondary market on the Exchange.

Creation of Creation Units

   Portfolio Deposits may be made through the DIAMONDS Clearing Process or
outside the DIAMONDS Clearing Process only by a person who executed a
Participant Agreement with the Distributor and the Trustee. The Distributor
shall reject any order that is not submitted in proper form. A creation order
is deemed received by the Distributor on the date on which it is placed
("Transmittal Date") if (a) such order is received by the Distributor not later
than the Closing Time on such Transmittal Date and (b) all other procedures set
forth in the Participant Agreement are properly followed. The Transaction Fee
is charged at the time of creation of a Creation Unit, and an additional amount
not to exceed three (3) times the Transaction Fee applicable for one Creation
Unit is charged for creations outside the DIAMONDS Clearing Process, in part
due to the increased expense associated with settlement.

   The Trustee, at the direction of the Sponsor, may increase*, reduce or waive
the Transaction fee (and/or the additional amounts charged in connection with
creations and/or redemptions outside the DIAMONDS Clearing Process) for certain
lot-size creations and/or redemptions of Creation Units. The Sponsor has the
right to vary the lot-size of Creation Units subject to such an increase,
reduction or waiver. The existence of any such variation shall be disclosed in
the then current DIAMONDS Prospectus.

   The DJIA is a price-weighted stock index; that is, the component stocks of
the DJIA are represented in exactly equal share amounts and therefore are
accorded relative importance in the DJIA based on their prices. The shares of
common stock of the stock portion of a Portfolio Deposit on any date of deposit
will reflect the composition of the component stocks of the DJIA on such day.
The portfolio of Index Securities that is the basis for a Portfolio Deposit
varies as changes are made in the composition of the Index Securities. The
Trustee makes available to NSCC** before
--------
*  Such increase is subject to the 10 Basis Point Limit.
** As of December 31, 2001, the Depository Trust and Clearing Corporation
   ("DTCC") owned 100% of the issued and outstanding shares of common stock of
   NSCC. Also, as of such date, the National Association of Securities Dealers,
   Inc., the parent Company of the Exchange, owned 4.3941% of the issued and
   outstanding shares of common stock of DTCC ("DTCC Shares"), the Exchange
   owned 4.3941% of DTCC Shares, the American Stock Exchange Clearing
   Corporation LLC, a wholly-owned subsidiary of the Exchange, owned .00189% of
   DTCC Shares and the Trustee owned 5.3248% of DTCC Shares.

                                      24

<PAGE>

the commencement of trading on each Business Day a list of the names and
required number of shares of each of the Index Securities in the current
Portfolio Deposit as well as the amount of the Dividend Equivalent Payment for
the previous Business Day. Under certain extraordinary circumstances which may
make it impossible for the Trustee to provide such information to NSCC on a
given Business Day, NSCC shall use the information regarding the identity of
the Index Securities of the Portfolio Deposit on the previous Business Day. The
identity of each of the Index Securities required for a Portfolio Deposit, as
in effect on October 31, 2001, is set forth in the above Schedule of
Investments. The Sponsor makes available (a) on each Business Day, the Dividend
Equivalent Payment effective through and including the previous Business Day,
per outstanding DIAMONDS unit, and (b) every 15 seconds throughout the day at
the Exchange a number representing, on a per DIAMONDS unit basis, the sum of
the Dividend Equivalent Payment effective through and including the previous
Business Day, plus the current value of the securities portion of a Portfolio
Deposit as in effect on such day (which value may occasionally include a cash
in lieu amount to compensate for the omission of a particular Index Security
from such Portfolio Deposit). Such information is calculated based upon the
best information available to the Sponsor and may be calculated by other
persons designated to do so by the Sponsor. The inability of the Sponsor to
provide such information will not in itself result in a halt in the trading of
DIAMONDS on the Exchange. Investors interested in creating DIAMONDS or
purchasing DIAMONDS in the secondary market should not rely solely on such
information in making investment decisions but should also consider other
market information and relevant economic and other factors (including, without
limitation, information regarding the DJIA, the Index Securities and financial
instruments based on the DJIA).

   Upon receipt of one or more Portfolio Deposits, following placement with the
Distributor of an order to create DIAMONDS, the Trustee (a) delivers one or
more Creation Units to DTC, (b) removes the DIAMONDS unit position from its
account at DTC and allocates it to the account of the DTC Participant acting on
behalf of the investor creating Creation Unit(s), (c) increases the aggregate
value of the Portfolio, and (d) decreases the fractional undivided interest in
the Trust represented by each DIAMONDS unit.

   Under certain circumstances, (a) a portion of the stock portion of a
Portfolio Deposit may consist of contracts to purchase certain Index Securities
or (b) a portion of the Cash Component may consist of cash in an amount
required to enable the Trustee to purchase such Index Securities. If there is a
failure to deliver Index Securities that are the subject of such contracts to
purchase, the Trustee will acquire such Index Securities in a timely manner. To
the extent the price of any such Index Security increases or decreases between
the time of creation and the time of its purchase and delivery, DIAMONDS will
represent fewer or more shares of such Index

                                      25

<PAGE>

Security. Therefore, price fluctuations during the period from the time the
cash is received by the Trustee to the time the requisite Index Securities are
purchased and delivered will affect the value of all DIAMONDS.

Procedures for Creation of Creation Units

   All creation orders must be placed in Creation Units and must be received by
the Distributor by no later than the closing time of the regular trading
session on the New York Stock Exchange, Inc. ("Closing Time") (ordinarily 4:00
p.m. New York time) in each case on the date such order is placed in order for
creation to be effected based on the NAV of the Trust as determined on such
date. Orders must be transmitted by telephone or other transmission method
acceptable to the Distributor and the Trustee, pursuant to procedures set forth
in the Participant Agreement and described in this prospectus. Severe economic
or market disruptions or changes, or telephone or other communication failure,
may impede the ability to reach the Distributor, the Trustee, a Participating
Party or a DTC Participant.

   All questions as to the number of shares of each Index Security, the amount
of the Cash Component and the validity, form, eligibility (including time of
receipt) and acceptance for deposit of any Index Securities to be delivered are
determined by the Trustee. The Trustee may reject a creation order if (a) the
depositor or group of depositors, upon obtaining the DIAMONDS ordered, would
own 80% or more of the current outstanding DIAMONDS, (b) the Portfolio Deposit
is not in proper form; (c) acceptance of the Portfolio Deposit would have
certain adverse tax consequences; (d) the acceptance of the Portfolio Deposit
would, in the opinion of counsel, be unlawful; (e) the acceptance of the
Portfolio Deposit would otherwise have an adverse effect on the Trust or the
rights of Beneficial Owners; or (f) circumstances outside the control of the
Trustee make it for all practical purposes impossible to process creations of
DIAMONDS. The Trustee and the Sponsor are under no duty to give notification of
any defects or irregularities in the delivery of Portfolio Deposits or any
component thereof and neither of them shall incur any liability for the failure
to give any such notification.

Placement of Creation Orders Using DIAMONDS Clearing Process

   Creation Units created through the DIAMONDS Clearing Process must be
delivered through a Participating Party that has executed a Participant
Agreement. The Participant Agreement authorizes the Trustee to transmit to the
Participating Party such trade instructions as are necessary to effect the
creation order. Pursuant to the trade instructions from the Trustee to NSCC,
the Participating Party agrees to transfer the requisite Index Securities (or
contracts to purchase such Index Securities that are expected to be delivered
through the DIAMONDS Clearing Process in a "regular

                                      26

<PAGE>

way" manner by the third NSCC Business Day) and the Cash Component to the
Trustee, together with such additional information as may be required by the
Trustee.

Placement of Creation Orders Outside DIAMONDS Clearing Process

   Creation Units created outside the DIAMONDS Clearing Process must be
delivered through a DTC Participant that has executed a Participant Agreement
and has stated in its order that it is not using the DIAMONDS Clearing Process
and that creation will instead be effected through a transfer of stocks and
cash. The requisite number of Index Securities must be delivered through DTC to
the account of the Trustee by no later than 11:00 a.m. of the next Business Day
immediately following the Transmittal Date. The Trustee, through the Federal
Reserve Bank wire transfer system, must receive the Cash Component no later
than 2:00 p.m. on the next Business Day immediately following the Transmittal
Date. If the Trustee does not receive both the requisite Index Securities and
the Cash Component in a timely fashion, the order will be cancelled. Upon
written notice to the Distributor, the cancelled order may be resubmitted the
following Business Day using a Portfolio Deposit as newly constituted to
reflect the current NAV of the Trust. The delivery of DIAMONDS so created will
occur no later than the third (3rd) Business Day following the day on which the
creation order is deemed received by the Distributor.

Securities Depository; Book-Entry-Only System

   DTC acts as securities depository for DIAMONDS. DIAMONDS are represented by
a single global security, registered in the name of Cede & Co., as nominee for
DTC and deposited with, or on behalf of, DTC.

   DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities of its participants ("DTC
Participants") and to facilitate the clearance and settlement of securities
transactions among the DTC Participants through electronic book-entry changes
in their accounts, thereby eliminating the need for physical movement of
securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own DTC.* Access to
DTC system also is available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly ("Indirect Participants").
--------
* As of December 31, 2001, DTCC owned 100% of the issued and outstanding shares
  of the common stock of DTC.

                                      27

<PAGE>

   Upon the settlement date of any creation, transfer or redemption of
DIAMONDS, DTC credits or debits, on its book-entry registration and transfer
system, the amount of DIAMONDS so created, transferred or redeemed to the
accounts of the appropriate DTC Participants. The accounts to be credited and
charged are designated by the Trustee to NSCC, in the case of a creation or
redemption through the DIAMONDS Clearing Process, or by the Trustee and the DTC
Participant, in the case of a creation or redemption outside of the DIAMONDS
Clearing Process. Beneficial ownership of DIAMONDS is limited to DTC
Participants, Indirect Participants and persons holding interests through DTC
Participants and Indirect Participants. Ownership of beneficial interests in
DIAMONDS (owners of such beneficial interests are referred to herein as
"Beneficial Owners") is shown on, and the transfer of ownership is effected
only through, records maintained by DTC (with respect to DTC Participants) and
on the records of DTC Participants (with respect to Indirect Participants and
Beneficial Owners that are not DTC Participants). Beneficial Owners are
expected to receive from or through the DTC Participant a written confirmation
relating to their purchase of DIAMONDS. The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability of certain
investors to acquire beneficial interests in DIAMONDS.

   As long as Cede & Co., as nominee of DTC, is the registered owner of
DIAMONDS, references to the registered or record owner of DIAMONDS shall mean
Cede & Co. and shall not mean the Beneficial Owners of DIAMONDS. Beneficial
Owners of DIAMONDS are not entitled to have DIAMONDS registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered the record or registered holders
thereof under the Trust Agreement. Accordingly, each Beneficial Owner must rely
on the procedures of DTC, the DTC Participant and any Indirect Participant
through which such Beneficial Owner holds its interests, to exercise any rights
under the Trust Agreement.

   The Trustee recognizes DTC or its nominee as the owner of all DIAMONDS for
all purposes except as expressly set forth in the Trust Agreement. Pursuant to
the agreement between the Trustee and DTC ("Depository Agreement"), DTC is
required to make available to the Trustee upon request and for a fee to be
charged to the Trust a listing of the DIAMONDS holdings of each DTC
Participant. The Trustee inquires of each such DTC Participant as to the number
of Beneficial Owners holding DIAMONDS, directly or indirectly, through the DTC
Participant. The Trustee provides each such DTC Participant with copies of such
notice, statement or other communication, in the form, number and at the place
as the DTC Participant may reasonably request, in order that the notice,
statement or communication may be transmitted by the DTC Participant, directly
or indirectly, to the Beneficial Owners. In addition, the Trust pays to each
such DTC Participant a fair and reasonable amount as reimbursement for the
expense attendant to such transmittal, all subject to applicable statutory and
regulatory requirements.

                                      28

<PAGE>

Distributions are made to DTC or its nominee, Cede & Co. DTC or Cede & Co.,
upon receipt of any payment of distributions in respect of DIAMONDS, is
required immediately to credit DTC Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in DIAMONDS, as
shown on the records of DTC or its nominee. Payments by DTC Participants to
Indirect Participants and Beneficial Owners of DIAMONDS held through such DTC
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in a "street name," and will be the responsibility of such
DTC Participants. Neither the Trustee nor the Sponsor has or will have any
responsibility or liability for any aspects of the records relating to or
notices to Beneficial Owners, or payments made on account of beneficial
ownership interests in DIAMONDS, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or for any other
aspect of the relationship between DTC and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Beneficial Owners owning through such DTC Participants.

   DTC may discontinue providing its service with respect to DIAMONDS at any
time by giving notice to the Trustee and the Sponsor and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Trustee and the Sponsor shall take action either to find a
replacement for DTC to perform its functions at a comparable cost or, if such a
replacement is unavailable, to terminate the Trust.

                            REDEMPTION OF DIAMONDS

   DIAMONDS are redeemable only in Creation Units. Creation Units are
redeemable in kind only and are not redeemable for cash except as described
under "Summary--Highlights--Termination of the Trust."

Procedures for Redemption of Creation Units

   Redemption orders must be placed with a Participating Party (for redemptions
through the DIAMONDS Clearing Process) or DTC Participant (for redemptions
outside the DIAMONDS Clearing Process), as applicable, in the form required by
such Participating Party or DTC Participant. A particular broker may not have
executed a Participant Agreement, and redemption orders may have to be placed
by the broker through a Participating Party or a DTC Participant who has
executed a Participant Agreement. At any given time, there may be only a
limited number of broker-dealers that have executed a Participant Agreement.
Redeemers should afford sufficient time to permit (a) proper submission of the
order by a Participating Party or DTC Participant to the Trustee and (b) the
receipt of the DIAMONDS to be redeemed and any Excess Cash Amounts by the
Trustee in a timely manner. Orders for redemption effected outside the DIAMONDS
Clearing Process are likely to require

                                      29

<PAGE>

transmittal by the DTC Participant earlier on the Transmittal Date than orders
effected using the DIAMONDS Clearing Process. These deadlines vary by
institution. Persons redeeming outside the DIAMONDS Clearing Process are
required to transfer DIAMONDS through DTC and the Excess Cash amounts, if any,
through the Federal Reserve Bank wire transfer system in a timely manner.

   Requests for redemption may be made on any Business Day to the Trustee and
not to the Distributor. In the case of redemptions made through the DIAMONDS
Clearing Process, the Transaction Fee is deducted from the amount delivered to
the redeemer. In the case of redemptions outside the DIAMONDS Clearing Process,
the Transaction Fee plus an additional amount not to exceed three (3) times the
Transaction Fee applicable for one Creation Unit per Creation Unit redeemed,
and such amount is deducted from the amount delivered to the redeemer.

   The Trustee transfers to the redeeming Beneficial Owner via DTC and the
relevant DTC Participant(s) a portfolio of stocks for each Creation Unit
delivered, generally identical in weighting and composition to the stock
portion of a Portfolio Deposit as in effect (a) on the date a request for
redemption is deemed received by the Trustee or (b) in the case of the
termination of the Trust, on the date that notice of the termination of the
Trust is given. The Trustee also transfers via the relevant DTC Participant(s)
to the redeeming Beneficial Owner a "Cash Redemption Payment," which on any
given Business Day is an amount identical to the amount of the Cash Component
and is equal to a proportional amount of the following: dividends on the
Portfolio Securities for the period through the date of redemption, net of
expenses and liabilities for such period including, without limitation, (i)
taxes or other governmental charges against the Trust not previously deducted
if any, and (ii) accrued fees of the Trustee and other expenses of the Trust,
as if the Portfolio Securities had been held for the entire accumulation period
for such distribution, plus or minus the Balancing Amount. The redeeming
Beneficial Owner must deliver to the Trustee any amount by which the amount
payable to the Trust by such Beneficial Owner exceeds the amount of the Cash
Redemption Payment ("Excess Cash Amounts"). For redemptions through the
DIAMONDS Clearing Process, the Trustee effects a transfer of the Cash
Redemption Payment and stocks to the redeeming Beneficial Owner by the third
(3rd) NSCC Business Day following the date on which request for redemption is
deemed received. For redemptions outside the DIAMONDS Clearing Process, the
Trustee transfers the Cash Redemption Payment and the stocks to the redeeming
Beneficial Owner by the third (3rd) Business Day following the date on which
the request for redemption is deemed received. The Trustee will cancel all
DIAMONDS delivered upon redemption.

   If the Trustee determines that an Index Security is likely to be unavailable
or available in insufficient quantity for delivery by the Trust upon
redemption, the Trustee may elect to deliver the cash equivalent value of any
such Index Securities,

                                      30

<PAGE>

based on its market value as of the Evaluation Time on the date such redemption
is deemed received by the Trustee as a part of the Cash Redemption Payment in
lieu thereof.

   If a redeemer is restricted by regulation or otherwise from investing or
engaging in a transaction in one or more Index Securities, the Trustee may
elect to deliver the cash equivalent value based on the market value of any
such Index Securities as of the Evaluation Time on the date of the redemption
as a part of the Cash Redemption Payment in lieu thereof. In such case, the
investor will pay the Trustee the standard Transaction Fee, and may pay an
additional amount equal to the actual amounts incurred in connection with such
transaction(s) but in any case not to exceed three (3) times the Transaction
Fee applicable for one Creation Unit.

   The Trustee upon the request of a redeeming investor, may elect to redeem
Creation Units in whole or in part by providing such redeemer, with a portfolio
of stocks differing in exact composition from Index Securities but not
differing in NAV from the then-current Portfolio Deposit. Such a redemption is
likely to be made only if it were determined that it would be appropriate in
order to maintain the Trust's correspondence to the composition and weighting
of the DJIA Index.

   The Trustee may sell Portfolio Securities to obtain sufficient cash proceeds
to deliver to the redeeming Beneficial Owner. To the extent cash proceeds are
received by the Trustee in excess of the required amount, such cash proceeds
shall be held by the Trustee and applied in accordance with the guidelines
applicable to residual cash set forth under "The Portfolio--Portfolio
Securities Conform to the DJIA".

   All redemption orders must be transmitted to the Trustee by telephone or
other transmission method acceptable to the Trustee so as to be received by the
Trustee not later than the Closing Time on the Transmittal Date, pursuant to
procedures set forth in the Participant Agreement. Severe economic or market
disruption or changes, or telephone or other communication failure, may impede
the ability to reach the Trustee, a Participating Party, or a DTC Participant.

   The calculation of the value of the stocks and the Cash Redemption Payment
to be delivered to the redeeming Beneficial Owner is made by the Trustee
according to the procedures set forth under "Valuation" and is computed as of
the Evaluation Time on the Business Day on which a redemption order is deemed
received by the Trustee. Therefore, if a redemption order in proper form is
submitted to the Trustee by a DTC Participant not later than the Closing Time
on the Transmittal Date, and the requisite DIAMONDS are delivered to the
Trustee prior to DTC Cut-Off Time on such Transmittal Date, then the value of
the stocks and the Cash Redemption Payment to be delivered to the Beneficial
Owner is determined by the Trustee as of the Evaluation Time on such
Transmittal Date. If, however, a redemption order is submitted not later than
the Closing Time on a Transmittal Date but either (a) the requisite DIAMONDS

                                      31

<PAGE>

are not delivered by DTC Cut-Off Time on the next Business Day immediately
following such Transmittal Date or (b) the redemption order is not submitted in
proper form, then the redemption order is not deemed received as of such
Transmittal Date. In such case, the value of the stocks and the Cash Redemption
Payment to be delivered to the Beneficial Owner is computed as of the
Evaluation Time on the Business Day that such order is deemed received by the
Trustee, i.e., the Business Day on which the DIAMONDS are delivered through DTC
to the Trustee by DTC Cut-Off Time on such Business Day pursuant to a properly
submitted redemption order.

   The Trustee may suspend the right of redemption, or postpone the date of
payment of the NAV for more than five (5) Business Days following the date on
which the request for redemption is deemed received by the Trustee (a) for any
period during which the New York Stock Exchange is closed, (b) for any period
during which an emergency exists as a result of which disposal or evaluation of
the Securities is not reasonably practicable, (c) or for such other period as
the SEC may by order permit for the protection of Beneficial Owners. Neither
the Sponsor nor the Trustee is liable to any person or in any way for any loss
or damages that may result from any such suspension or postponement.

Placement of Redemption Orders Using DIAMONDS Clearing Process

   A redemption order made through the DIAMONDS Clearing Process is deemed
received on the Transmittal Date if (a) such order is received by the Trustee
not later than the Closing Time on such Transmittal Date and (b) all other
procedures set forth in the Participant Agreement are properly followed. The
order is effected based on the NAV of the Trust as determined as of the
Evaluation Time on the Transmittal Date. A redemption order made through the
DIAMONDS Clearing Process and received by the Trustee after the Closing Time
will be deemed received on the next Business Day immediately following the
Transmittal Date. The Participant Agreement authorizes the Trustee to transmit
to NSCC on behalf of the Participating Party such trade instructions as are
necessary to effect the Participating Party's redemption order. Pursuant to
such trade instructions from the Trustee to NSCC, the Trustee transfers the
requisite stocks (or contracts to purchase such stocks which are expected to be
delivered in a "regular way" manner) by the third (3rd) NSCC Business Day
following the date on which the request for redemption is deemed received, and
the Cash Redemption Payment.

Placement of Redemption Orders Outside DIAMONDS Clearing Process

   A DTC Participant who wishes to place an order for redemption of DIAMONDS to
be effected outside the DIAMONDS Clearing Process need not be a Participating
Party, but its order must state that the DTC Participant is not using the
DIAMONDS Clearing Process and that redemption will instead be effected through
transfer of DIAMONDS directly through DTC. An order is deemed received by the
Trustee on

                                      32

<PAGE>

the Transmittal Date if (a) such order is received by the Trustee not later
than the Closing Time on such Transmittal Date, (b) such order is preceded or
accompanied by the requisite number of DIAMONDS specified in such order, which
delivery must be made through DTC to the Trustee no later than 11:00 a.m. on
the next Business Day immediately following such Transmittal Date ("DTC Cut-Off
Time") and (iii) all other procedures set forth in the Participant Agreement
are properly followed. Any Excess Cash Amounts owed by the Beneficial Owner
must be delivered no later than 2:00 p.m. on the next Business Day immediately
following the Transmittal Date.

   The Trustee initiates procedures to transfer the requisite stocks (or
contracts to purchase such stocks that are expected to be delivered within
three Business Days and the Cash Redemption Payment to the redeeming Beneficial
Owner by the third Business Day following the Transmittal Date.

                                 THE PORTFOLIO

   Because the objective of the Trust is to provide investment results that,
before expenses, generally correspond to the price and yield performance of the
DJIA, the Portfolio at any time will consist of as many of Index Securities as
is practicable. It is anticipated that cash or cash items (other than dividends
held for distribution) normally would not be a substantial part of the Trust's
net assets. Although the Trust may at any time fail to own certain of Index
Securities, the Trust will be substantially invested in Index Securities and
the Sponsor believes that such investment should result in a close
correspondence between the investment performance of the DJIA and that derived
from ownership of DIAMONDS.

Portfolio Securities Conform to the DJIA

   The DJIA is a price-weighted index of 30 component common stocks, the
components of which are determined by the editors of The Wall Street Journal,
without any consultation with the companies, the respective stock exchange or
any official agency.

   The Trust is not managed and therefore the adverse financial condition of an
issuer does not require the sale of stocks from the Portfolio. The Trustee on a
non-discretionary basis adjusts the composition of the Portfolio to conform to
changes in the composition and/or weighting structure of Index Securities. To
the extent that the method of determining the DJIA is changed by Dow Jones in a
manner that would affect the adjustments provided for herein, the Trustee and
the Sponsor have the right to amend the Trust Agreement, without the consent of
DTC or Beneficial Owners, to conform the adjustments to such changes and to
maintain the objective of tracking the DJIA.

                                      33

<PAGE>

   The Trustee aggregates certain of these adjustments and makes conforming
changes to the Portfolio at least monthly. The Trustee directs its stock
transactions only to brokers or dealers, which may include affiliates of the
Trustee, from whom it expects to obtain the most favorable prices or execution
of orders. Adjustments are made more frequently in the case of significant
changes to the DJIA. Specifically, the Trustee is required to adjust the
composition of the Portfolio whenever there is a change in the identity of any
Index Security (i.e., a substitution of one security for another) within three
(3) Business Days before or after the day on which the change is scheduled to
take effect. While other DJIA changes may lead to adjustments in the Portfolio,
the most common changes are likely to occur as a result of changes in the Index
Securities included in the DJIA and as a result of stock splits. The Trust
Agreement sets forth the method of adjustments which may occur thereunder as a
result of corporate actions to the DJIA, such as stock splits or changes in the
identity of the component stocks.

   For example, in the event of an Index Security change (in which the common
stock of one issuer held in the DJIA is replaced by the common stock of
another), the Trustee may sell all shares of the Portfolio Security
corresponding to the old Index Security and use the proceeds of such sale to
purchase the replacement Portfolio Security corresponding to the new Index
Security. If the share price of the removed Portfolio Security was higher than
the price of its replacement, the Trustee will calculate how to allocate the
proceeds of the sale of the removed Portfolio Security between the purchase of
its replacement and purchases of additional shares of other Portfolio
Securities so that the number of shares of each Portfolio Security after the
transactions would be as nearly equal as practicable. If the share price of the
removed Portfolio Security was lower than the price of its replacement, the
Trustee will calculate the number of shares of each of the other Portfolio
Securities that must be sold in order to purchase enough shares of the
replacement Portfolio Security so that the number of shares of each Portfolio
Security after the transactions would be as nearly equal as practicable.

   In the event of a stock split, the price weighting of the stock which is
split will drop. The Trustee may make the corresponding adjustment by selling
the additional shares of the Portfolio Security received from the stock split.
The Trustee may then use the proceeds of the sale to buy an equal number of
shares of each Portfolio Security--including the Portfolio Security which had
just experienced a stock split. In practice, of course, not all the shares
received in the split would be sold: enough of those shares would be retained
to make an increase in the number of split shares equal to the increase in the
number of shares in each of the other Portfolio Securities purchased with the
proceeds of the sale of the remaining shares resulting from such split.

   As a result of the purchase and sale of stock in accordance with these
requirements, or the creation of Creation Units, the Trust may hold some amount
of

                                      34

<PAGE>

residual cash (other than cash held temporarily due to timing differences
between the sale and purchase of stock or cash delivered in lieu of Index
Securities or undistributed income or undistributed capital gains). This amount
may not exceed for more than two (2) consecutive Business Days  5/10th of 1
percent of the value of the Portfolio. If the Trustee has made all required
adjustments and is left with cash in excess of  5/10th of 1 percent of the
value of the Portfolio, the Trustee will use such cash to purchase additional
Index Securities.

   All portfolio adjustments are made as described herein unless such
adjustments would cause the Trust to lose its status as a "regulated investment
company" under Subchapter M of the Code. Additionally, the Trustee is required
to adjust the composition of the Portfolio at any time to insure the continued
qualification of the Trust as a regulated investment company.

   The Trustee relies on Dow Jones for information as to the composition and
weightings of Index Securities. If the Trustee becomes incapable of obtaining
or processing such information or NSCC is unable to receive such information
from the Trustee on any Business Day, the Trustee shall use the composition and
weightings of Index Securities for the most recently effective Portfolio
Deposit for the purposes of all adjustments and determinations (including,
without limitation, determination of the stock portion of the Portfolio
Deposit) until the earlier of (a) such time as current information with respect
to Index Securities is available or (b) three (3) consecutive Business Days
have elapsed. If such current information is not available and three (3)
consecutive Business Days have elapsed, the composition and weightings of
Portfolio Securities (as opposed to Index Securities) shall be used for the
purposes of all adjustments and determinations (including, without limitation,
determination of the stock portion of the Portfolio Deposit) until current
information with respect to Index Securities is available.

   If the Trust is terminated, the Trustee shall use the composition and
weightings of Portfolio Securities as of such notice date for the purpose and
determination of all redemptions or other required uses of the basket.

   From time to time Dow Jones may adjust the composition of the DJIA because
of a merger or acquisition involving one or more Index Securities. In such
cases, the Trust, as shareholder of an issuer that is the object of such merger
or acquisition activity, may receive various offers from would-be acquirors of
the issuer. The Trustee is not permitted to accept any such offers until such
time as it has been determined that the stocks of the issuer will be removed
from the DJIA. As stocks of an issuer are often removed from the DJIA only
after the consummation of a merger or acquisition of such issuer, in selling
the securities of such issuer the Trust may receive, to the extent that market
prices do not provide a more attractive alternative, whatever consideration is
being offered to the shareholders of such issuer that have

                                      35

<PAGE>

not tendered their shares prior to such time. Any cash received in such
transactions is reinvested in Index Securities in accordance with the criteria
set forth above. Any stocks received as a part of the consideration that are
not Index Securities are sold as soon as practicable and the cash proceeds of
such sale are reinvested in accordance with the criteria set forth above.

Adjustments to the Portfolio Deposit

   On each Business Day (each such day an "Adjustment Day"), the number of
shares and identity of each Index Security in a Portfolio Deposit are adjusted
in accordance with the following procedure. At the close of the market the
Trustee calculates the NAV of the Trust. The NAV is divided by the number of
outstanding DIAMONDS multiplied by 50,000 DIAMONDS in one Creation Unit,
resulting in a NAV per Creation Unit ("NAV Amount"). The Trustee then
calculates the number of shares (without rounding) of each of the component
stocks of the DJIA in a Portfolio Deposit for the following Business Day
("Request Day"), so that (a) the market value at the close of the market on the
Adjustment Day of the stocks to be included in the Portfolio Deposit on Request
Day, together with the Dividend Equivalent Payment effective for requests to
create or redeem on the Adjustment Day, equals the NAV Amount and (b) the
identity and weighting of each of the stocks in a Portfolio Deposit mirrors
proportionately the identity and weightings of the stocks in the DJIA, each as
in effect on Request Day. For each stock, the number resulting from such
calculation is rounded down to the nearest whole share. The identities and
weightings of the stocks so calculated constitute the stock portion of the
Portfolio Deposit effective on Request Day and thereafter until the next
subsequent Adjustment Day, as well as Portfolio Securities to be delivered by
the Trustee in the event of request for redemption on the Request Day and
thereafter until the following Adjustment Day.

   In addition to the foregoing adjustments, if a corporate action such as a
stock split, stock dividend or reverse split occurs with respect to any Index
Security that does not result in an adjustment to the DJIA divisor, the
Portfolio Deposit shall be adjusted to take into account the corporate action
in each case rounded to the nearest whole share.

   On the Request Day and on each day that a request for the creation or
redemption is deemed received, the Trustee calculates the market value of the
stock portion of the Portfolio Deposit as in effect on the Request Day as of
the close of the market and adds to that amount the Dividend Equivalent Payment
effective for requests to create or redeem on Request Day (such market value
and Dividend Equivalent Payment are collectively referred to herein as
"Portfolio Deposit Amount"). The Trustee then calculates the NAV Amount, based
on the close of the market on the Request Day. The difference between the NAV
Amount so calculated and the Portfolio Deposit Amount is the "Balancing
Amount". The Balancing Amount serves the function of

                                      36

<PAGE>

compensating for any differences between the value of the Portfolio Deposit
Amount and the NAV Amount at the close of trading on Request Day due to, for
example, (a) differences in the market value of the securities in the Portfolio
Deposit and the market value of the Securities on Request Day and (b) any
variances from the proper composition of the Portfolio Deposit due to rounding.

   The Dividend Equivalent Payment and the Balancing Amount in effect at the
close of business on the Request Date are collectively referred to as the Cash
Component or the Cash Redemption Payment. If the Balancing Amount is a positive
number (i.e., if the NAV Amount exceeds the Portfolio Deposit Amount) then,
with respect to creation, the Balancing Amount increases the Cash Component of
the then effective Portfolio Deposit transferred to the Trustee by the creator.
With respect to redemptions, the Balancing Amount is added to the cash
transferred to the redeemer by the Trustee. If the Balancing Amount is a
negative number (i.e., if the NAV Amount is less than the Portfolio Deposit
Amount) then, with respect to creation, this amount decreases the Cash
Component of the then effective Portfolio Deposit to be transferred to the
Trustee by the creator or, if such cash portion is less than the Balancing
Amount, the difference must be paid by the Trustee to the creator. With respect
to redemptions, the Balancing Amount is deducted from the cash transferred to
the redeemer or, if such cash is less than the Balancing Amount, the difference
must be paid by the redeemer to the Trustee.

   If the Trustee has included the cash equivalent value of one or more Index
Securities in the Portfolio Deposit because the Trustee has determined that
such Index
Securities are likely to be unavailable or available in insufficient quantity
for delivery, of if a creator or redeemer is restricted from investing or
engaging in transactions in one or more of such Index Securities, the Portfolio
Deposit so constituted shall determine the Index Securities to be delivered in
connection with the creation of DIAMONDS in Creation Unit size aggregations and
upon the redemption of DIAMONDS until the time the stock portion of the
Portfolio Deposit is subsequently adjusted.

                                   THE DJIA

The DJIA was first published in 1896. Initially comprised of 12 companies, the
DJIA has evolved into the most recognizable stock indicator in the world, and
the only index composed of companies that have sustained earnings performance
over a significant period of time. In its second century, the DJIA is the
oldest continuous barometer of the U.S. stock market, and the most widely
quoted indicator of U.S. stock market activity.

   The 30 stocks now comprising the DJIA are all leaders in their respective
industries, and their stocks are widely held by individuals and institutional
investors.

                                      37

<PAGE>

These stocks represent more than one-quarter of the $12.7 trillion market value
of all US common stocks.

   Dow Jones is not responsible for and shall not participate in the creation
or sale of DIAMONDS or in the determination of the timing of, prices at, or
quantities and proportions in which purchases or sales of Index Securities or
Securities shall be made. The information in this Prospectus concerning Dow
Jones and the DJIA has been obtained from sources that the Sponsor believes
to be reliable, but the Sponsor takes no responsibility for the accuracy of
such information.

   The following table shows the actual performance of the DJIA for the years
1896 through 2001. Stock prices fluctuated widely during this period and were
higher at the end than at the beginning. The results shown should not be
considered as a representation of the income yield or capital gain or loss that
may be generated by the DJIA in the future, nor should the results be
considered as a representation of the performance of the Trust.

<TABLE>
<CAPTION>
                                    DJIA     Point   Year %            %
     YearEnded                      Close    Change  Change    Divs  Yield
     ---------                     -------- -------- -------  ------ -----
     <S>                           <C>      <C>      <C>      <C>    <C>
     2001......................... 10021.50  -765.35   -7.10% 181.07 1.81%
     2000......................... 10786.85 - 710.27  - 6.18  172.08 1.60
     1999......................... 11497.12 2,315.69   25.20  168.52 1.47
     1998.........................  9181.43 1,273.18   16.10  151.13 1.65
     1997.........................  7908.25 1,459.98   22.60  136.10 1.72
     1996.........................  6448.27 1,331.20   26.00  131.14 2.03
     1995.........................  5117.12 1,282.70   33.50  116.56 2.28
     1994.........................  3834.44    80.30    2.10  105.66 2.76
     1993.........................  3754.09   453.00   13.70   99.66 2.65
     1992.........................  3301.11   132.30    4.20  100.72 3.05
     1991.........................  3168.83   535.20   20.30   95.18 3.00
     1990.........................  2633.66 - 119.50  - 4.30  103.70 3.94
     1989.........................  2753.20   584.60   27.00  103.00 3.74
     1988.........................  2168.57   229.70   11.80   79.53 3.67
     1987.........................  1938.83    42.90    2.30   71.20 3.67
     1986.........................  1895.95   349.30   22.60   67.04 3.54
     1985.........................  1546.67   335.10   27.70   62.03 4.01
     1984.........................  1211.57  - 47.10  - 3.70   60.63 5.00
     1983.........................  1258.64   212.10   20.30   56.33 4.48
     1982.........................  1046.54   171.50   19.60   54.14 5.17
     1981.........................   875.00  - 89.00  - 9.20   56.22 6.43
     1980.........................   963.99   125.30   14.90   54.36 5.64
     1979.........................   838.74    33.70    4.20   50.98 6.08
     1978.........................   805.01  - 26.20  - 3.10   48.52 6.03
     1977.........................   831.17 - 173.50 - 17.30   45.84 5.52
     1976.........................  1004.65   152.20   17.90   41.40 4.12
     1975.........................   852.41   236.20   38.30   37.46 4.39
     1974.........................   616.24 - 234.60 - 27.60   37.72 6.12
     1973.........................   850.86 - 169.20 - 16.60   35.33 4.15
</TABLE>

                                      38

<PAGE>

<TABLE>
<CAPTION>
                                     DJIA    Point   Year %           %
      YearEnded                      Close   Change  Change   Divs  Yield
      ---------                     ------- -------- -------  ----- -----
      <S>                           <C>     <C>      <C>      <C>   <C>
      1972......................... 1020.02   129.80   14.60% 32.27  3.16%
      1971.........................  890.20    51.30    6.10  30.86  3.47
      1970.........................  838.92    38.60    4.80  31.53  3.76
      1969.........................  800.36 - 143.40 - 15.20  33.90  4.24
      1968.........................  943.75    38.60    4.30  31.34  3.32
      1967.........................  905.11   119.40   15.20  30.19  3.34
      1966.........................  785.69 - 183.60 - 18.90  31.89  4.06
      1965.........................  969.26    95.10   10.90  28.61  2.95
      1964.........................  874.13   111.20   14.60  31.24  3.57
      1963.........................  762.95   110.90   17.00  23.41  3.07
      1962.........................  652.10  - 79.00 - 10.80  23.30  3.57
      1961.........................  731.14   115.30   18.70  22.71  3.11
      1960.........................  615.89  - 63.50  - 9.30  21.36  3.47
      1959.........................  679.36    95.70   16.40  20.74  3.05
      1958.........................  583.65   148.00   34.00  20.00  3.43
      1957.........................  435.69  - 63.80 - 12.80  21.61  4.96
      1956.........................  499.47    11.10    2.30  22.99  4.60
      1955.........................  488.40    84.00   20.80  21.58  4.42
      1954.........................  404.39   123.50   44.00  17.47  4.32
      1953.........................  280.90  - 11.00  - 3.80  16.11  5.74
      1952.........................  291.90    22.70    8.40  15.43  5.29
      1951.........................  269.23    33.80   14.40  16.34  6.07
      1950.........................  235.41    35.30   17.60  16.13  6.85
      1949.........................  200.13    22.80   12.90  12.79  6.39
      1948.........................  177.30   - 3.90  - 2.10  11.50  6.49
      1947.........................  181.16     4.00    2.20   9.21  5.08
      1946.........................  177.20  - 15.70  - 8.10   7.50  4.23
      1945.........................  192.91    40.60   26.60   6.69  3.47
      1944.........................  152.32    16.40   12.10   6.57  4.31
      1943.........................  135.89    16.50   13.80   6.30  4.64
      1942.........................  119.40     8.40    7.60   6.40  5.36
      1941.........................  110.96  - 20.20 - 15.40   7.59  6.84
      1940.........................  131.13  - 19.10 - 12.70   7.06  5.38
      1939.........................  150.24   - 4.50  - 2.90   6.11  4.07
      1938.........................  154.76    33.90   28.10   4.98  3.22
      1937.........................  120.85  - 59.10 - 32.80   8.78  7.27
      1936.........................  179.90    35.80   24.80   7.05  3.92
      1935.........................  144.13    40.10   38.50   4.55  3.16
      1934.........................  104.04     4.10    4.10   3.66  3.52
      1933.........................   99.90    40.00   66.70   3.40  3.40
      1932.........................   59.93  - 18.00 - 23.10   4.62  7.71
      1931.........................   77.90  - 86.70 - 52.70   8.40 10.78
      1930.........................  164.58  - 83.90 - 33.80  11.13  6.76
      1929.........................  248.48  - 51.50 - 17.20  12.75  5.13
      1928.........................  300.00    97.60   48.20     NA    NA
      1927.........................  202.40    45.20   28.80     NA    NA
      1926.........................  157.20     0.50    0.30     NA    NA
</TABLE>

                                      39

<PAGE>

<TABLE>
<CAPTION>
     Year                               DJIA   Point   Year %          %
     Ended                              Close  Change  Change   Divs Yield
     -----                              ------ ------- -------  ---- -----
     <S>                                <C>    <C>     <C>      <C>  <C>
     1925.............................. 156.66   36.20   30.00%  NA   NA
     1924.............................. 120.51   25.00   26.20   NA   NA
     1923..............................  95.52  - 3.20  - 3.30   NA   NA
     1922..............................  98.73   17.60   21.70   NA   NA
     1921..............................  81.10    9.10   12.70   NA   NA
     1920..............................  71.95 - 35.30 - 32.90   NA   NA
     1919.............................. 107.23   25.00   30.50   NA   NA
     1918..............................  82.20    7.80   10.50   NA   NA
     1917..............................  74.38 - 20.60 - 21.70   NA   NA
     1916..............................  95.00  - 4.20  - 4.20   NA   NA
     1915..............................  99.15   44.60   81.70   NA   NA
     1914..............................  54.58 - 24.20 - 30.70   NA   NA
     1913..............................  78.78  - 9.10 - 10.30   NA   NA
     1912..............................  87.87    6.20    7.60   NA   NA
     1911..............................  81.68    0.30    0.40   NA   NA
     1910..............................  81.36 - 17.70 - 17.90   NA   NA
     1909..............................  99.05   12.90   15.00   NA   NA
     1908..............................  86.15   27.40   46.60   NA   NA
     1907..............................  58.75 - 35.60 - 37.70   NA   NA
     1906..............................  94.35  - 1.90  - 1.90   NA   NA
     1905..............................  96.20   26.60   38.20   NA   NA
     1904..............................  69.61   20.50   41.70   NA   NA
     1903..............................  49.11 - 15.20 - 23.60   NA   NA
     1902..............................  64.29  - 0.30  - 0.40   NA   NA
     1901..............................  64.56  - 6.10  - 8.70   NA   NA
     1900..............................  70.71    4.60    7.00   NA   NA
     1899..............................  66.08    5.60    9.20   NA   NA
     1898..............................  60.52   11.10   22.50   NA   NA
     1897..............................  49.41    9.00   22.20   NA   NA
     1896..............................  40.45      NA      NA   NA   NA
</TABLE>

--------
   Source: Dow Jones Indexes. Year-end index values reflect neither
   reinvestment of dividends nor costs associated with investing, such as
   brokerage commissions. Yields are calculated by dividing the sum of the most
   recent four quarterly per-share dividend payments of all components by the
   sum of the component prices.

   The DJIA is a price-weighted stock index, meaning that the component stocks
of the DJIA are accorded relative importance based on their prices. In this
regard, the DJIA is unlike many other stock indexes which weight their
component stocks by market capitalization (price times shares outstanding). The
DJIA is called an "average" because originally it was calculated by adding up
the component stock prices and then dividing by the number of stocks. The
method remains the same today, but the number of significant digits in the
divisor (the number that is divided into the total of the stock prices) has
been increased to eight significant digits to minimize distortions due to
rounding and has been adjusted over time to insure continuity of the DJIA after
component stock changes and corporate actions, as discussed below.

                                      40

<PAGE>

   The DJIA divisor is adjusted due to corporate actions that change the price
of any of its component shares. The most frequent reason for such an adjustment
is a stock split. For example, suppose a company in the DJIA issues one new
share for each share outstanding. After this two-for-one "split," each share of
stock is worth half what it was immediately before, other things being equal.
But without an adjustment in the divisor, this split would produce a distortion
in the DJIA. An adjustment must be made to compensate so that the "average"
will remain unchanged. At Dow Jones, this adjustment is handled by changing the
divisor.* The formula used to calculate divisor adjustments is:

<TABLE>
      <S>         <C> <C>             <C> <C>          <C> <C>
                                          Adjusted Sum     Unadjusted Sum
      New Divisor =   Current Divisor x    of Prices   /     of Prices
</TABLE>

   Changes in the composition of the DJIA are made entirely by the editors of
The Wall Street Journal without consultation with the companies, the respective
stock exchange, or any official agency. Additions or deletions of components
may be made to achieve better representation of the broad market and of
American industry.

   In selecting components for the DJIA, the following criteria are used: (a)
the company is not a utility or in the transportation business; (b) the company
has a premier reputation in its field; (c) the company has a history of
successful growth; and (d) there is wide interest among individual and
institutional investors. Whenever one component is changed, the others are
reviewed. For the sake of historical continuity, composition changes are made
rarely.

   The most recent changes in the components of the DJIA were made, effective
with trading Monday, November 1, 1999.

   Companies removed were:

    .   Union Carbide Corp., which had been in the DJIA since 1928.

    .   Goodyear Tire & Rubber Co., which had been in the DJIA since 1930.

    .   Sears, Roebuck & Co., which had been in the DJIA since 1924.

    .   Chevron, formerly Standard Oil Company of California, which had been in
        the DJIA since 1930.

   Companies added were:

    .   Home Depot Inc.
--------
* Currently, the divisor is adjusted after the close of business on the day
  prior to the occurrence of the split; the divisor is not adjusted for regular
  cash dividends.

                                      41

<PAGE>

    .   Intel Corp.

    .   Microsoft Corp.

    .   SBC Communications

   Effective January 1, 2001, the DJIA replaced J.P. Morgan & Co. with J.P.
Morgan Chase & Co. following the completed acquisition of such company by Chase
Manhattan Corp.

                               LICENSE AGREEMENT

   The License Agreement grants the Sponsor and the Exchange a license to use
the DJIA as a basis for determining the composition of the Portfolio and to use
certain trade names and trademarks of Dow Jones in connection with the
Portfolio. The License Agreement may be amended without the consent of any of
the Beneficial Owners of DIAMONDS. Currently, the License Agreement is
scheduled to terminate five years from the commencement date of trading of
DIAMONDS and is subject to a five year renewal period following such date. The
term of the License Agreement may be extended without the consent of any of the
Beneficial Owners of DIAMONDS.

   None of the Trust, the Trustee, the Distributor, DTC or any Beneficial Owner
of DIAMONDS is entitled to any rights whatsoever under the foregoing licensing
arrangements or to use the trademarks and service marks "Dow Jones",
"DIAMONDS", "THE DOW INDUSTRIALS", "The Dow", "DJIA" or "Dow Jones Industrial
Average" or to use the DJIA except as specifically described herein or as may
be specified in the Trust Agreement.

   The Trust is not sponsored, endorsed, sold or promoted by Dow Jones and Dow
Jones makes no representation or warranty, express or implied, to the
Beneficial Owners of DIAMONDS or any member of the public regarding the
advisability of investing in securities generally or in the Trust particularly.
Dow Jones' only relationship to the Trust is the licensing of certain
trademarks, trade names and service marks of Dow Jones and of the DJIA which is
determined, comprised and calculated by Dow Jones without regard to the Trust
or the Beneficial Owners of DIAMONDS. Dow Jones has no obligation to take the
needs of the Sponsor, the Exchange, the Trust or the Beneficial Owners of
DIAMONDS into consideration in determining, comprising or calculating the DJIA.
Dow Jones is not responsible for and has not participated in any determination
or calculation made with respect to issuance or redemption of DIAMONDS. Dow
Jones has no obligation or liability in connection with the administration,
marketing or trading of DIAMONDS.

   DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
DJIA OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS,

                                      42

<PAGE>

OR INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS
TO RESULTS TO BE OBTAINED BY THE SPONSOR, THE EXCHANGE, THE TRUST, BENEFICIAL
OWNERS OF DIAMONDS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DJIA OR
ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES,
AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE, WITH RESPECT TO THE DJIA OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES
HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE SPECIAL OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES, THE SPONSOR AND THE EXCHANGE.

                               EXCHANGE LISTING

   DIAMONDS are listed on the Exchange. The Trust is not required to pay a
listing fee to the Exchange. Transactions involving DIAMONDS in the public
trading market are subject to customary brokerage charges and commissions.

   The Sponsor's aim in designing DIAMONDS was to provide investors with a
security whose initial market value would approximate one-hundredth ( 1/100th)
the value of the DJIA. Of course, the market value of a DIAMONDS unit is
affected by a variety of factors, including capital gains distributions made,
and expenses incurred, by the Trust, and therefore, over time, a DIAMONDS unit
may no longer approximate 1/100th the value of the DJIA. The market price of a
DIAMONDS unit should reflect its share of the dividends accumulated on
Portfolio Securities and may be affected by supply and demand, market
volatility, sentiment and other factors.

   There can be no assurance that DIAMONDS will always be listed on the
Exchange. The Trust will be terminated if DIAMONDS are delisted. The Exchange
will consider the suspension of trading in or removal from listing of DIAMONDS
if (a) the Trust has more than 60 days remaining until termination and there
are fewer than 50 record and/or beneficial holders of DIAMONDS for 30 or more
consecutive trading days; (b) the DJIA is no longer calculated or available; or
(c) such other event occurs or condition exists which, in the opinion of the
Exchange, makes further dealings on the Exchange inadvisable.

   DIAMONDS also are listed and traded on the Singapore Exchange Ltd. ("SGX")
pursuant to a joint venture created by the Exchange and the SGX. In the future,
DIAMONDS may be listed and traded on other non-U.S. exchanges pursuant to
similar arrangements.

                                      43

<PAGE>

                            TAX STATUS OF THE TRUST

   For the fiscal year ended October 31, 2001, the Trust believes that it
qualified for tax treatment as a "regulated investment company" under
Subchapter M of the Code. The Trust intends to continue to so qualify. To
qualify as a regulated investment company, the Trust must, among other things,
(a) derive in each taxable year at least 90% of its gross income from
dividends, interest, gains from the sale or other disposition of stock,
securities or foreign currencies, or certain other sources, (b) meet certain
diversification tests, and (c) distribute in each year at least 90% of its
investment company taxable income. If the Trust qualifies as a regulated
investment company, subject to certain conditions and requirements, the Trust
will not be subject to federal income tax to the extent its income is
distributed in a timely manner. Any undistributed income may be subject to tax,
including a four percent (4%) excise tax imposed by section 4982 of the Code on
certain undistributed income of a regulated investment company that does not
distribute to shareholders in a timely manner at least ninety-eight percent
(98%) of its taxable income (including capital gains).

Tax Consequences to Beneficial Owners

   Dividends paid by the Trust from its investment company taxable income
(which includes dividends, interest and the excess of net short-term capital
gains over net long-term capital losses) are taxable to Beneficial Owners as
ordinary income. A dividend paid in January is considered for federal income
tax purposes to have been paid by the Trust and received by Beneficial Owners
on the preceding December 31 if the dividend was declared in the preceding
October, November or December to Beneficial Owners of record as shown on the
records of DTC and the DTC Participants on a date in one of those months.

   Distributions paid by the Trust from the excess of net long-term capital
gains over net short-term capital losses are considered "capital gains
dividends" regardless of the length of time an investor has owned DIAMONDS. Any
loss on the sale or exchange of a share held for six months or less may be
treated as a long-term capital loss to the extent of any capital gain dividends
received by the Beneficial Owner. For corporate investors, dividends from net
investment income (but not return of capital distributions or capital gain
dividends) generally qualify for the corporate dividends-received deduction to
the extent of qualifying dividend income received by the Trust, subject to the
limitations contained in the Code. Investors should note that the regular
monthly dividends paid by the Trust are not based on the Trust's investment
company taxable income and net capital gain, but rather are based on the
dividends paid with respect to Portfolio Securities. As a result, a portion of
the distributions of the Trust may be treated as a return of capital or a
capital gain dividend for federal income tax purposes or the Trust may make
additional distributions in excess of the yield performance of Portfolio
Securities in order to distribute all of its investment company taxable income
and net capital gain.

                                      44

<PAGE>

   Distributions in excess of the Trust's current or accumulated earnings and
profits (as specially computed) generally are treated as a return of capital
for federal income tax purposes and reduce a Beneficial Owner's tax basis in
DIAMONDS. Return of capital distributions may result, for example, if a portion
of the dividends declared represents cash amounts deposited in connection with
Portfolio Deposits rather than dividends actually received by the Trust. Under
certain circumstances, a significant portion of the Trust's regular monthly
dividends could be treated as return of capital distributions. Such
circumstances may be more likely to occur in periods during which the number of
outstanding DIAMONDS fluctuates significantly, as may occur during the initial
years of the Trust. Beneficial Owners receive annually notification from the
Trustee through the DTC Participants as to the tax status of the Trust's
distributions. A distribution paid shortly after a purchase or creation of
DIAMONDS may be taxable even though in effect it may represent a return of
capital.

   Distributions reinvested in additional DIAMONDS through the means of the
Service are nevertheless taxable dividends to Beneficial Owners acquiring such
additional DIAMONDS to the same extent as if such dividends were received in
cash.

   The sale of DIAMONDS by a Beneficial Owner is a taxable event, and may
result in a gain or loss, which generally should be a capital gain or loss for
Beneficial Owners that are not dealers in securities.

   Dividend distributions, capital gains distributions, and capital gains from
sales or redemptions may also be subject to state, local and foreign taxes.

   Under the Code, an in-kind redemption of DIAMONDS does not result in the
recognition of taxable gain or loss by the Trust but generally constitutes a
taxable event for the redeeming shareholder. Upon redemption, a Beneficial
Owner generally recognizes gain or loss measured by the difference on the date
of redemption between the aggregate value of the cash and stocks received and
its tax basis in the DIAMONDS redeemed. Stocks received upon redemption (which
will be comprised of the stock portion of the Portfolio Deposit in effect on
the date of redemption) generally have an initial tax basis equal to their
respective market values on the date of redemption. The Internal Revenue
Service ("IRS") may assert that any resulting loss may not be deducted by a
Beneficial Owner on the basis that there has been no material change in such
Beneficial Owner's economic position or that the transaction has no significant
economic or business utility apart from the anticipated tax consequences.
Beneficial Owners of DIAMONDS in Creation Unit size aggregations should consult
their own tax advisors as to the consequences to them of the redemption of
DIAMONDS.

   Deposit of a Portfolio Deposit with the Trustee in exchange for Creation
Units do not result in the recognition of taxable gain or loss by the Trust but
generally

                                      45

<PAGE>

constitute a taxable event to the investor under the Code, and an investor
generally recognizes gain or loss with respect to each stock deposited equal to
the difference between the amount realized in respect of the stock and the
investor's tax basis therein. The amount realized with respect to a stock
deposited should be determined by allocating the value on the date of deposit
of the DIAMONDS received (less any cash paid to the Trust, or plus any cash
received from the Trust, in connection with the deposit) among the stocks
deposited on the basis of their respective fair market values at that time. The
IRS may assert that any resulting losses may not be deducted by an investor on
the basis that there has been no material change in the investor's economic
position or that the transaction has no significant economic or business
utility or purpose apart from the anticipated tax consequences. Investors
should consult their own tax advisors as to the tax consequences to them of a
deposit to the Trust.

   The Trustee has the right to reject the order to create Creation Units
transmitted to it by the Distributor if the investor or group of investors,
upon obtaining the DIAMONDS ordered, would own eighty percent (80%) or more of
the outstanding DIAMONDS, and if pursuant to section 351 of the Code such a
circumstance would result in the Trust having a basis in the stocks deposited
different from the market value of such stocks on the date of deposit. The
Trustee has the right to require information regarding DIAMONDS ownership
pursuant to the Participant Agreement and from DTC and to rely thereon to the
extent necessary to make the foregoing determination as a condition to the
acceptance of a Portfolio Deposit.

   Ordinary income dividends received via DTC by Beneficial Owners who are
non-resident aliens are subject to a thirty percent (30%) United States
withholding tax unless a reduced rate of withholding or a withholding exemption
is provided under applicable tax treaties. Non-resident holders of DIAMONDS are
urged to consult their own tax advisors concerning the applicability of United
States withholding tax.

   Backup withholding at a rate equal to the fourth lowest income tax rate
applicable to individuals (which, under current law, is 30% for 2002 and 2003,
29% for 2004 and 2005, and 28% for 2006 and thereafter) applies to dividends,
capital gain distributions, redemptions and sales of DIAMONDS unless (a) the
Beneficial Owner is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. The amount of any backup withholding from a payment
to a Beneficial Owner is allowed as a credit against the holder's U.S. federal
income tax liability and may entitle such holder to a refund from the U.S.
Internal Revenue Service, if the required information is furnished to the U.S.
Internal Revenue Service.

   The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisors concerning the
federal,

                                      46

<PAGE>

state, local and foreign tax consequences to them of an investment in the
Trust, including the effect of possible legislative changes.

ERISA Considerations

   In considering the advisability of an investment in DIAMONDS, fiduciaries of
pension, profit sharing or other tax-qualified retirement plans (including
Keogh Plans) and welfare plans (collectively, "Plans") subject to the fiduciary
responsibility requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), should consider whether an investment in DIAMONDS
is permitted by the documents and instruments governing the Plan and whether
the investment satisfies the exclusive benefit, prudence and diversification
requirements of ERISA. Individual retirement account ("IRA") investors should
consider that an IRA may make only such investments as are authorized by its
governing instruments.

   The fiduciary standards and prohibited transaction rules of ERISA and the
Code will not apply to transactions involving the Trust's assets while DIAMONDS
are held by a Plan or IRA. Unlike many other investment vehicles offered to
Plans and IRAs, the Trust's assets will not be treated as "plan assets" of the
Plans or IRAs which acquire or purchase DIAMONDS. Although ERISA imposes
certain duties on Plan fiduciaries and ERISA and/or Section 4975 of the Code
prohibit certain transactions involving "plan assets" between Plans or IRAs and
their fiduciaries or certain related persons, those rules will not apply to
transactions involving the Trust's assets because DIAMONDS represent an
interest in the Trust, and the Trust is registered as an investment company
under the Investment Company Act of 1940. ERISA, the Code and U.S. Department
of Labor regulations contain unconditional language exempting the assets of
registered investment companies from treatment as "plan assets" in applying the
fiduciary and prohibited transaction provisions of ERISA and the Code.

   Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA)
and foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to
the requirements of ERISA or Section 4975 of the Code. The fiduciaries of
governmental plans should, however, consider the impact of their respective
state pension codes on investments in DIAMONDS and the considerations discussed
above, to the extent applicable.

                        CONTINUOUS OFFERING OF DIAMONDS

   Creation Units are offered continuously to the public by the Trust through
the Distributor. Persons making Portfolio Deposits and creating Creation Units
receive no fees, commissions or other form of compensation or inducement of any
kind from the Sponsor or the Distributor, and no such person has any obligation
or responsibility to the Sponsor or Distributor to effect any sale or resale of
DIAMONDS.

                                      47

<PAGE>

   Because new DIAMONDS can be created and issued on an ongoing basis, at any
point during the life of the Trust, a "distribution", as such term is used in
the Securities Act of 1933 ("1933 Act"), may be occurring. Broker-dealers and
other persons are cautioned that some of their activities may result in their
being deemed participants in a distribution in a manner which could render them
statutory underwriters and subject them to the prospectus-delivery and
liability provisions of the 1933 Act. For example, a broker-dealer firm or its
client may be deemed a statutory underwriter if it takes Creation Units after
placing a creation order with the Distributor, breaks them down into the
constituent DIAMONDS and sells the DIAMONDS directly to its customers; or if it
chooses to couple the creation of a supply of new DIAMONDS with an active
selling effort involving solicitation of secondary market demand for DIAMONDS.
A determination of whether one is an underwriter must take into account all the
facts and circumstances pertaining to the activities of the broker-dealer or
its client in the particular case, and the examples mentioned above should not
be considered a complete description of all the activities that could lead to
categorization as an underwriter.

   Dealers who are not "underwriters" but are participating in a distribution
(as contrasted to ordinary secondary trading transactions), and thus dealing
with DIAMONDS that are part of an "unsold allotment" within the meaning of
Section 4(3)(C) of the 1933 Act, would be unable to take advantage of the
prospectus-delivery exemption provided by Section 4(3) of the 1933 Act.

   The Sponsor intends to qualify DIAMONDS in states selected by the Sponsor
and through broker-dealers who are members of the National Association of
Securities Dealers, Inc. Investors intending to create or redeem Creation Units
in transactions not involving a broker-dealer registered in such investor's
state of domicile or residence should consult their legal advisor regarding
applicable broker-dealer or securities regulatory requirements under the state
securities laws prior to such creation or redemption.

                         DIVIDEND REINVESTMENT SERVICE

   The Trust has made the Service available for use by Beneficial Owners
through DTC Participants for reinvestment of their cash proceeds. Some DTC
Participants may not elect to utilize the Service; therefore, an interested
DIAMONDS investor may wish to contact such investor's broker to ascertain the
availability of the Service through such broker. Each broker may require
investors to adhere to specific procedures and timetables in order to
participate in the Service and such investors should ascertain from their
broker such necessary details.

   Distributions reinvested in additional DIAMONDS through the Service are
nevertheless taxable dividends to Beneficial Owners to the same extent as if
received in cash.

                                      48

<PAGE>

   The Trustee generally uses the cash proceeds of dividends received from all
Beneficial Owners participating in reinvestment through the Service to obtain
Index Securities necessary to create the requisite number of DIAMONDS at the
close of business on each DIAMONDS distribution date. Any cash balance
remaining after the requisite number of DIAMONDS has been created is
distributed, on a pro rata basis, to all Beneficial Owners who participated in
the Service. Brokerage commissions, if any, incurred in obtaining Index
Securities necessary to create additional DIAMONDS with the cash from the
distributions is an expense of the Trust.*

                             EXPENSES OF THE TRUST

   Until further notice, the Sponsor has undertaken that it will not permit the
ordinary operating expenses of the Trust, as calculated by the Trustee, to
exceed an amount that is  18/100 of 1% (0.1800%) per annum of the daily NAV of
the Trust after taking into account any expense offset credits. To the extent
the ordinary operating expenses of the Trust do exceed such 0.1800% amount, the
Sponsor will reimburse the Trust for, or assume, the excess. The Sponsor
retains the ability to be repaid by the Trust for expenses so reimbursed or
assumed to the extent that subsequently during the fiscal year expenses fall
below the 0.1800% per annum level on any given day. For purposes of this
undertaking, ordinary operating expenses of the Trust do not include taxes,
brokerage commissions and any extraordinary non-recurring expenses, including
the cost of any litigation to which the Trust or the Trustee may be a party.
The Sponsor may discontinue this undertaking or renew it for a specified period
of time, or may choose to reimburse or assume certain Trust expenses in later
periods to keep Trust expenses at a level it believes to be attractive to
investors. In any event, on any day and during any period over the life of the
Trust, total fees and expenses of the Trust may exceed 0.1800% per annum.

   Ordinary operating expenses of the Trust are currently being accrued at an
annual rate of 0.1800%. Future accruals will depend primarily on the level of
the Trust's net assets and the level of Trust expenses. There is no guarantee
that the Trust's ordinary operating expenses will not exceed 0.1800% of the
Trust's daily net asset value and such rate may be changed without notice.

   Subject to any applicable cap, the Sponsor may charge the Trust a special
fee for certain services the Sponsor may provide to the Trust which would
otherwise be provided by the Trustee in an amount not to exceed the actual cost
of providing such
--------
* It is difficult to estimate the annual dollar amount of brokerage commissions
  that might be incurred in connection with the Dividend Reinvestment Service
  during any fiscal year. The Trustee estimates that during fiscal year 2001,
  the approximate amount of annual brokerage commissions incurred in
  implementing the Service was less than $0.001 per DIAMONDS unit.

                                      49

<PAGE>

services. The Sponsor or the Trustee from time to time may voluntarily assume
some expenses or reimburse the Trust so that total expenses of the Trust are
reduced. Neither the Sponsor nor the Trustee is obligated to do so and either
one or both parties may discontinue such voluntary assumption of expenses or
reimbursement at any time without notice.

   The following charges are or may be accrued and paid by the Trust: (a) the
Trustee's fee, (b) fees payable to transfer agents for the provision of
transfer agency services; (c) fees of the Trustee for extraordinary services
performed under the Trust Agreement; (d) various governmental charges; (e) any
taxes, fees and charges payable by the Trustee with respect to DIAMONDS
(whether in Creation Units or otherwise); (f) expenses and costs of any action
taken by the Trustee or the Sponsor to protect the Trust and the rights and
interests of Beneficial Owners of DIAMONDS (whether in Creation Units or
otherwise); (g) indemnification of the Trustee or the Sponsor for any losses,
liabilities or expenses incurred by it in the administration of the Trust; (h)
expenses incurred in contacting Beneficial Owners of DIAMONDS during the life
of the Trust and upon termination of the Trust; and (i) other out-of-pocket
expenses of the Trust incurred pursuant to actions permitted or required under
the Trust Agreement.

   In addition, the following expenses are or may be charged to the Trust: (a)
reimbursement to the Sponsor of amounts paid by it to Dow Jones in respect of
annual licensing fees pursuant to the License Agreement, (b) federal and state
annual registration fees for the issuance of DIAMONDS, and (c) expenses of the
Sponsor relating to the printing and distribution of marketing materials
describing DIAMONDS and the Trust (including, but not limited to, associated
legal, consulting, advertising, and marketing costs and other out-of-pocket
expenses such as printing). In addition, initial fees and expenses totaling
approximately $2,300,000, in connection with the organization of the Trust, are
being capitalized and amortized over five years from the start of the Trust's
operations on a straight-line basis and charged to the Trust, unless the Trust
is sooner terminated or if by law or regulation the Trust is required to
amortize such costs over a shorter period of time. In such cases, the Trustee
shall follow the requisite time period for such amortization. Pursuant to the
provisions of an exemptive order, the expenses set forth in this paragraph may
be charged to the Trust by the Trustee in an amount equal to the actual costs
incurred, but in no case shall such charges exceed  20/100 of 1% (0.20%) per
annum of the daily NAV of the Trust.

   If the income received by the Trust in the form of dividends and other
distributions on Portfolio Securities is insufficient to cover Trust expenses,
the Trustee may make advances to the Trust to cover such expenses. Otherwise,
the Trustee may sell Portfolio Securities in an amount sufficient to pay such
expenses. The Trustee may reimburse itself in the amount of any such advance,
together with interest thereon

                                      50

<PAGE>

at a percentage rate equal to the then current overnight federal funds rate, by
deducting such amounts from (a) dividend payments or other income of the Trust
when such payments or other income is received, (b) the amounts earned or
benefits derived by the Trustee on cash held by the Trustee for the benefit of
the Trust, and (c) the sale of Portfolio Securities. Notwithstanding the
foregoing, if any advance remains outstanding for more than forty-five (45)
Business Days, the Trustee may sell Portfolio Securities to reimburse itself
for such advance and any accrued interest thereon. These advances will be
secured by a lien on the assets of the Trust in favor of the Trustee. The
expenses of the Trust are reflected in the NAV of the Trust.

   For services performed under the Trust Agreement, the Trustee is paid a fee
at an annual rate of  6/100 of 1% to  10/100 of 1% of the NAV of the Trust, as
shown below, such percentage amount to vary depending on the NAV of the Trust,
plus or minus the Adjustment Amount. The compensation is computed on each
Business Day based on the NAV of the Trust on such day, and the amount thereof
is accrued daily and paid quarterly. To the extent that the amount of the
Trustee's compensation, before any adjustment in respect of the Adjustment
Amount, is less than specified amounts, the Sponsor has agreed to pay the
amount of any such shortfall. Notwithstanding the fee schedule set forth in the
table below, in the fourth year of the Trust's operation and in subsequent
years, the Trustee shall be paid a minimum fee of $400,000 per annum as
adjusted by the CPI-U to take effect at the beginning of the fourth year and
each year thereafter. To the extent that the amount of the Trustee's
compensation, prior to any adjustment in respect of the Adjustment Amount, is
less than specified amounts, the Sponsor has agreed to pay the amount of any
such shortfall. The Trustee also may waive all or a portion of such fee.

                               TRUSTEE FEE SCALE

<TABLE>
<CAPTION>
     Net Asset Value                     Fee as a Percentage of Net
       of the Trust                       Asset Value of the Trust
     ---------------                     --------------------------
     <S>                         <C>
     $0-$499,999,999............   10/100 of 1% per annum plus or minus the
                                   Adjustment Amount
     $500,000,000-$2,499,999,999   8/100 of 1% per annum plus or minus the
                                   Adjustment Amount*
     $2,500,000,000 and above...   6/100 of 1% per annum plus or minus the
                                   Adjustment Amount*
</TABLE>

--------
* The fee indicated applies to that portion of the net asset value of the Trust
  which falls in the size category indicated.

   As of October 31, 2001, and as of December 31, 2001, the NAV of the Trust
was $2,734,476,408 and $3,003,990,942, respectively. No representation is made
as to the actual NAV of the Trust on any future date as it is subject to change
at any time due to fluctuations in the market value of securities or to
creations or redemptions made in the future.

                                      51

<PAGE>

   The Adjustment Amount is calculated at the end of each quarter and applied
against the Trustee's fee for the following quarter. "Adjustment Amount" is an
amount which is intended, depending upon the circumstances, either to (a)
reduce the Trustee's fee by the amount that the Transaction Fees paid on
creation and redemption exceed the costs of those activities, and by the amount
of excess earnings on cash held for the benefit of the Trust* or (b) increase
the Trustee's fee by the amount that the Transaction Fee (plus additional
amounts paid in connection with creations or redemptions outside the DIAMONDS
Clearing Process), paid on creations or redemptions, falls short of the actual
costs of these activities. If in any quarter the Adjustment Amount exceeds the
fee payable to the Trustee as set forth above, the Trustee uses such excess
amount to reduce other Trust expenses, subject to certain federal tax
limitations. To the extent that the amount of such excess exceeds the Trust's
expenses for such quarter, any remaining excess is retained by the Trustee
as part of its compensation. If in any quarter the costs of processing
creations and redemptions exceed the amounts charged as a Transaction Fee (plus
the additional amounts paid in connection with creations or redemptions outside
the DIAMONDS Clearing Process) net of the excess earnings, if any, on cash held
for the benefit of the Trust, the Trustee will augment the Trustee's fee by the
resulting Adjustment Amount. The net Adjustment Amount is usually a credit to
the Trust. To make the expense ratio of the Trust comparable to the expense
ratio of most other investment companies, it is shown as a "below the line"
adjustment to Trust's expenses. If the adjustment is negative, it is shown
"above the line."

                                   VALUATION

   The NAV of the Trust is computed as of the Evaluation Time shown under
"Summary--Essential Information" on each Business Day. The NAV of the Trust on
a per DIAMONDS unit basis is determined by subtracting all liabilities
(including accrued expenses and dividends payable) from the total value of the
Portfolio and other assets and dividing the result by the total number of
outstanding DIAMONDS.

   The value of the Portfolio is determined by the Trustee in good faith in the
following manner. If Portfolio Securities are listed on one or more national
securities exchanges, such evaluation is generally based on the closing sale
price on that day (unless the Trustee deems such price inappropriate as a basis
for evaluation) on the exchange which is deemed to be the principal market
therefor (the New York or American Stock Exchange if the stocks are listed
thereon) or, if there is no such appropriate closing sale price on such
exchange, at the last sale price (unless the Trustee deems such price
inappropriate as a basis for evaluation). If the stocks are not so listed or,
if so listed and the principal market therefor is other than on such

--------
* The excess earnings on cash amount is currently calculated, and applied, on a
  monthly basis.

                                      52

<PAGE>

exchange or there is no such closing sale price available, such evaluation
shall generally be made by the Trustee in good faith based on the closing price
on the over-the-counter market (unless the Trustee deems such price
inappropriate as a basis for evaluation) or if there is no such appropriate
closing price, (a) on current bid prices, (b) if bid prices are not available,
on the basis of current bid prices for comparable stocks, (c) by the Trustee's
appraising the value of the stocks in good faith on the bid side of the market,
or (d) by any combination thereof.

                          ADMINISTRATION OF THE TRUST

Distributions to Beneficial Owners

   The regular monthly ex-dividend date for DIAMONDS is the third Friday in
each calendar month, unless such day is not a Business Day, in which case the
ex-dividend date is the immediately preceding Business Day ("Ex-Dividend
Date"). Beneficial Owners reflected on the records of DTC and the DTC
Participants on the second Business Day following the Ex-Dividend Date ("Record
Date") are entitled to receive an amount representing dividends accumulated on
Portfolio Securities through the monthly dividend period which ends on the
Business Day preceding such Ex-Dividend Date (including stocks with ex-dividend
dates falling within such monthly dividend period), net of fees and expenses,
accrued daily for such period. For the purposes of all dividend distributions,
dividends per DIAMONDS unit are calculated at least to the nearest  1/1000th of
$0.01. The payment of dividends is made on the Monday preceding the third (3rd)
Friday of the next calendar month or the next subsequent Business Day if such
Monday is not a Business Day ("Dividend Payment Date"). Dividend payments are
made through DTC and the DTC Participants to Beneficial Owners then of record
with funds received from the Trustee.

   Dividends payable to the Trust in respect of Portfolio Securities are
credited by the Trustee to a non-interest bearing account as of the date on
which the Trust receives such dividends. Other moneys received by the Trustee
in respect of the Portfolio, including but not limited to the Cash Component,
the Cash Redemption Payment, all moneys realized by the Trustee from the sale
of options, warrants or other similar rights received or distributed in respect
of Portfolio Securities as dividends or distributions and capital gains
resulting from the sale of Portfolio Securities are credited by the Trustee to
a non-interest bearing account. All funds collected or received are held by the
Trustee without interest until distributed in accordance with the provisions of
the Trust Agreement. To the extent the amounts credited to the account generate
interest income or an equivalent benefit to the Trustee, such interest income
or benefit is used to reduce the Trustee's annual fee.

   Any additional distributions the Trust may need to make so as to continue to
qualify as a "regulated investment company" would consist of (a) an increase in
the

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distribution scheduled for January to include any amount by which estimated
Trust investment company taxable income and net capital gains for a year
exceeds the amount of Trust taxable income previously distributed with respect
to such year or, if greater, the minimum amount required to avoid imposition of
such excise tax, and (b) a distribution soon after actual annual investment
company taxable income and net capital gains of the Trust have been computed of
the amount, if any, by which such actual income exceeds the distributions
already made. The NAV of the Trust is reduced in direct proportion to the
amount of such additional distributions. The magnitude of the additional
distributions, if any, depends upon a number of factors, including the level of
redemption activity experienced by the Trust. Because substantially all
proceeds from the sale of stocks in connection with adjustments to the
Portfolio are used to purchase shares of Index Securities, the Trust may have
no cash or insufficient cash with which to pay such additional distributions.
In that case, the Trustee typically has to sell an approximately equal number
of shares of each of the Portfolio Securities sufficient to produce the cash
required to make such additional distributions.

   The Trustee may declare special dividends if such action is necessary or
advisable to preserve the status of the Trust as a regulated investment company
or to avoid imposition of income or excise taxes on undistributed income, and
to vary the frequency with which periodic distributions are made (e.g., from
monthly to quarterly) if it is determined by the Sponsor and the Trustee that
such a variance would be advisable to facilitate compliance with the rules and
regulations applicable to regulated investment companies or would otherwise be
advantageous to the Trust. In addition, the Trustee may change the regular
ex-dividend date for DIAMONDS to another date within the month or the quarter
if it is determined by the Sponsor and the Trustee that such a change would be
advantageous to the Trust. Notice of any such variance or change shall be
provided to Beneficial Owners via DTC and the DTC Participants.

   As soon as practicable after notice of termination of the Trust, the Trustee
will distribute via DTC and the DTC Participants to each Beneficial Owner
redeeming Creation Units before the termination date specified in such notice a
portion of Portfolio Securities and cash as described above. Otherwise, the
Trustee will distribute to each Beneficial Owner (whether in Creation Unit size
aggregations or otherwise), as soon as practical after termination of the
Trust, such Beneficial Owner's pro rata share of the NAV of the Trust.

   All distributions are made by the Trustee through DTC and the DTC
Participants to Beneficial Owners as recorded on the book entry system of DTC
and the DTC Participants.

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   The settlement date for the creation of DIAMONDS or the purchase of DIAMONDS
in the secondary market must occur on or before the Record Date in order for
such creator or purchaser to receive a distribution on the next Dividend
Payment Date. If the settlement date for such creation or a secondary market
purchase occurs after the Record Date, the distribution will be made to the
prior securityholder or Beneficial Owner as of such Record Date.

   Any Beneficial Owner interested in acquiring additional DIAMONDS with
proceeds received from distributions described above may elect dividend
reinvestment through DTC Participants by means of the Service, if such service
is available through the Beneficial Owner's broker.

Statements to Beneficial Owners; Annual Reports

   With each distribution, the Trustee furnishes for distribution to Beneficial
Owners a statement setting forth the amount being distributed, expressed as a
dollar amount per DIAMONDS unit.

   Promptly after the end of each fiscal year, the Trustee furnishes to the DTC
Participants for distribution to each person who was a Beneficial Owner of
DIAMONDS at the end of such fiscal year, an annual report of the Trust
containing financial statements audited by independent accountants of
nationally recognized standing and such other information as may be required by
applicable laws, rules and regulations.

Rights of Beneficial Owners

   Beneficial Owners may sell DIAMONDS in the secondary market, but must
accumulate enough DIAMONDS to constitute a full Creation Unit in order to
redeem through the Trust. The death or incapacity of any Beneficial Owner does
not operate to terminate the Trust nor entitle such Beneficial Owner's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust.

   Beneficial Owners shall not (a) have the right to vote concerning the Trust,
except with respect to termination and as otherwise expressly set forth in the
Trust Agreement, (b) in any manner control the operation and management of the
Trust, or (c) be liable to any other person by reason of any action taken by
the Sponsor or the Trustee. The Trustee has the right to vote all of the voting
stocks in the Trust. The Trustee votes the voting stocks of each issuer in the
same proportionate relationship as all other shares of each such issuer are
voted to the extent permissible and, if not permitted, abstains from voting.

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Amendments to the Trust Agreement

   The Trust Agreement may be amended from time to time by the Trustee and the
Sponsor without the consent of any Beneficial Owners (a) to cure any ambiguity
or to correct or supplement any provision that may be defective or inconsistent
or to make such other provisions as will not adversely affect the interests of
Beneficial Owners; (b) to change any provision as may be required by the SEC;
(c) to add or change any provision as may be necessary or advisable for the
continuing qualification of the Trust as a "regulated investment company" under
the Code; (d) to add or change any provision as may be necessary or advisable
if NSCC or DTC is unable or unwilling to continue to perform its functions; and
(e) to add or change any provision to conform the adjustments to the Portfolio
and the Portfolio Deposit to changes, if any, made by Dow Jones in its method
of determining the DJIA. The Trust Agreement may also be amended by the Sponsor
and the Trustee with the consent of the Beneficial Owners of 51% of the
outstanding DIAMONDS to add provisions to, or change or eliminate any of the
provisions of, the Trust Agreement or to modify the rights of Beneficial
Owners; although, the Trust Agreement may not be amended without the consent of
the Beneficial Owners of all outstanding DIAMONDS if such amendment would (a)
permit the acquisition of any securities other than those acquired in
accordance with the terms and conditions of the Trust Agreement; (b) reduce the
interest of any Beneficial Owner in the Trust; or (c) reduce the percentage of
Beneficial Owners required to consent to any such amendment.

   Promptly after the execution of an amendment, the Trustee receives from DTC,
pursuant to the terms of the Depository Agreement, a list of all DTC
Participants holding DIAMONDS. The Trustee inquires of each such DTC
Participant as to the number of Beneficial Owners for whom such DTC Participant
holds DIAMONDS, and provides each such DTC Participant with sufficient copies
of a written notice of the substance of such amendment for transmittal by each
such DTC Participant to Beneficial Owners.

Termination of the Trust Agreement

   The Trust Agreement provides that the Sponsor has the discretionary right to
direct the Trustee to terminate the Trust if at any time the NAV of the Trust
is less than $350,000,000, as such dollar amount shall be adjusted for
inflation in accordance with the CPI-U. This adjustment is to take effect at
the end of the fourth year following the Initial Date of Deposit and at the end
of each year thereafter and to be made so as to reflect the percentage increase
in consumer prices as set forth in the CPI-U for the twelve month period ending
in the last month of the preceding fiscal year.

   The Trust may be terminated (a) by the agreement of the Beneficial Owners of
66 2/3% of outstanding DIAMONDS; (b) if DTC is unable or unwilling to continue
to

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<PAGE>

perform its functions as set forth under the Trust Agreement and a comparable
replacement is unavailable; (c) if NSCC no longer provides clearance services
with respect to DIAMONDS, or if the Trustee is no longer a participant in NSCC;
(d) if Dow Jones ceases publishing the DJIA; (e) if the License Agreement is
terminated; or (f) if DIAMONDS are delisted from the Exchange. The Trust will
also terminate by its terms on the Termination Date.

   The Trust will terminate if either the Sponsor or the Trustee resigns or is
removed and a successor is not appointed. The dissolution of the Sponsor or its
ceasing to exist as a legal entity for any cause whatsoever, however, will not
cause the termination of the Trust Agreement or the Trust unless the Trustee
deems termination to be in the best interests of Beneficial Owners.

   Prior written notice of the termination of the Trust must be given at least
twenty (20) days before termination of the Trust to all Beneficial Owners. The
notice must set forth the date on which the Trust will be terminated, the
period during which the assets of the Trust will be liquidated, the date on
which Beneficial Owners of DIAMONDS (whether in Creation Unit size aggregations
or otherwise) will receive in cash the NAV of the DIAMONDS held, and the date
upon which the books of the Trust shall be closed. The notice shall further
state that, as of the date thereof and thereafter, neither requests to create
additional Creation Units nor Portfolio Deposits will be accepted, that no
additional DIAMONDS will be created for the purpose of reinvesting dividend
distributions, and that, as of the date thereof and thereafter, the portfolio
of stocks delivered upon redemption shall be identical in composition and
weighting to Portfolio Securities as of such date rather than the stock portion
of the Portfolio Deposit as in effect on the date request for redemption is
deemed received. Beneficial Owners of Creation Units may, in advance of the
Termination Date, redeem in kind directly from the Trust.

   Within a reasonable period after the Termination Date, the Trustee shall,
subject to any applicable provisions of law, use its best efforts to sell all
of the Portfolio Securities not already distributed to redeeming Beneficial
Owners of Creation Units. The Trustee shall not be liable for or responsible in
any way for depreciation or loss incurred because of any such sale. The Trustee
may suspend such sales upon the occurrence of unusual or unforeseen
circumstances, including but not limited to a suspension in trading of a stock,
the closing or restriction of trading on a stock exchange, the outbreak of
hostilities, or the collapse of the economy. The Trustee shall deduct from the
proceeds of sale its fees and all other expenses and transmit the remaining
amount to DTC for distribution, together with a final statement setting forth
the computation of the gross amount distributed. DIAMONDS not redeemed before
termination of the Trust will be redeemed in cash at NAV based on the proceeds
of the sale of Portfolio Securities, with no minimum aggregation of DIAMONDS
required.

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                                    SPONSOR

   The Sponsor is a Delaware limited liability company incorporated on April 6,
1998 with offices c/o the Exchange, 86 Trinity Place, New York, New York 10006.
The Sponsor's Internal Revenue Service Employer Identification Number is
52-2127241. The Exchange is the sole member of the Sponsor and the Exchange is
a "control person" of the Sponsor as such term is defined in the Securities Act
of 1933.

   The Sponsor, at its own expense, may from time to time provide additional
promotional incentives to brokers who sell DIAMONDS to the public. In certain
instances, these incentives may be provided only to those brokers who meet
certain threshold requirements for participation in a given incentive program,
such as selling a significant number of DIAMONDS within a specified period.

   If at any time the Sponsor fails to undertake or perform or becomes
incapable of undertaking or performing any of the duties required under the
Trust Agreement, or resigns, or becomes bankrupt or its affairs are taken over
by public authorities, the Trustee may appoint a successor Sponsor, agree to
act as Sponsor itself, or may terminate the Trust Agreement and liquidate the
Trust. Notice of the resignation or removal of the Sponsor and the appointment
of a successor shall be mailed by the Trustee to DTC and the DTC Participants
for distribution to Beneficial Owners. Upon a successor Sponsor's execution of
a written acceptance of appointment as Sponsor of the Trust, the successor
Sponsor becomes vested with all of the rights, powers, duties and obligations
of the original Sponsor. Any successor Sponsor may be compensated at rates
deemed by the Trustee to be reasonable.

   The Sponsor may resign by executing and delivering to the Trustee an
instrument of resignation. Such resignation shall become effective upon the
appointment of a successor Sponsor and the acceptance of appointment by the
successor Sponsor, unless the Trustee either agrees to act as Sponsor or
terminates the Trust Agreement and liquidates the Trust. The dissolution of the
Sponsor or its ceasing to exist as a legal entity for any cause whatsoever will
not cause the termination of the Trust Agreement or the Trust unless the
Trustee deems termination to be in the best interests of the Beneficial Owners
of DIAMONDS.

   The Trust Agreement provides that the Sponsor is not liable to the Trustee,
the Trust or to the Beneficial Owners of DIAMONDS for taking any action, or for
refraining from taking any action, made in good faith or for errors in
judgment, but is liable only for its own gross negligence, bad faith, willful
misconduct or willful malfeasance in the performance of its duties or its
reckless disregard of its obligations and duties under the Trust Agreement. The
Sponsor is not liable or responsible in any way for depreciation or loss
incurred by the Trust because of the sale of any Portfolio Securities. The
Trust Agreement further provides that the Sponsor and its directors,

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<PAGE>

subsidiaries, shareholders, officers, employees, and affiliates under common
control with the Sponsor shall be indemnified from the assets of the Trust and
held harmless against any loss, liability or expense incurred without gross
negligence, bad faith, willful misconduct or willful malfeasance on the part of
any such party in the performance of its duties or reckless disregard of its
obligations and duties under the Trust Agreement, including the payment of the
costs and expenses of defending against any claim or liability.

                                    TRUSTEE

   The Trustee is a bank and trust company organized under the laws of the
Commonwealth of Massachusetts with its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110. The Trustee's Internal Revenue
Service Employer Identification Number is 04-1867445. The Trustee is subject to
supervision and examination by the Massachusetts Division of Banks and the
Federal Reserve Bank of Boston.

   Information regarding Cash Redemption Payment amounts, number of outstanding
DIAMONDS and Transaction Fees may be obtained from the Trustee at the toll-free
number: 1-800-545-4189. Complete copies of the Trust Agreement and a list of
the parties that have executed a Participant Agreement may be obtained from the
Trustee's principal office.

   The Trustee may resign and be discharged of the Trust created by the Trust
Agreement by executing a notice of resignation in writing and filing such
notice with the Sponsor and mailing a copy of the notice of resignation to all
DTC Participants reflected on the records of DTC as owning DIAMONDS for
distribution to Beneficial Owners as provided above not less than sixty (60)
days before the date such resignation is to take effect. Such resignation
becomes effective upon the appointment of and the acceptance of the Trust by a
successor Trustee. The Sponsor, upon receiving notice of such resignation, is
obligated to use its best efforts to appoint a successor Trustee promptly. If
no successor is appointed within sixty (60) days after the date such notice of
resignation is given, the Trust shall terminate.

   If the Trustee becomes incapable of acting as such or is adjudged bankrupt
or is taken over by any public authority, the Sponsor may discharge the Trustee
and appoint a successor Trustee as provided in the Trust Agreement. The Sponsor
shall mail notice of such discharge and appointment via the DTC Participants to
Beneficial Owners. Upon a successor Trustee's execution of a written acceptance
of an appointment as Trustee for the Trust, the successor Trustee becomes
vested with all the rights, powers, duties and obligations of the original
Trustee. A successor Trustee must be (a) a trust company, corporation or
national banking association organized, doing

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<PAGE>

business under the laws of the United States or any state thereof; (b)
authorized under such laws to exercise corporate trust powers; and (c) at all
times have an aggregate capital, surplus and undivided profit of not less than
$50,000,000.

   Beneficial Owners of 51% of the then outstanding DIAMONDS may at any time
remove the Trustee by written instrument(s) delivered to the Trustee and the
Sponsor. The Sponsor shall thereupon use its best efforts to appoint a
successor Trustee as described above.

   The Trust Agreement limits Trustee's liabilities. It provides, among other
things, that the Trustee is not liable for (a) any action taken in reasonable
reliance on properly executed documents or for the disposition of monies or
stocks or for the evaluations required to be made thereunder, except by reason
of its own gross negligence, bad faith, willful malfeasance, willful
misconduct, or reckless disregard of its duties and obligations; (b)
depreciation or loss incurred by reason of the sale by the Trustee of any
Portfolio Securities; (c) any action the Trustee takes where the Sponsor fails
to act; and (d) any taxes or other governmental charges imposed upon or in
respect of Portfolio Securities or upon the interest thereon or upon it as
Trustee or upon or in respect of the Trust which the Trustee may be required to
pay under any present or future law of the United States of America or of any
other taxing authority having jurisdiction.

   The Trustee and its directors, subsidiaries, shareholders, officers,
employees, and affiliates under common control with the Trustee will be
indemnified from the assets of the Trust and held harmless against any loss,
liability or expense incurred without gross negligence, bad faith, willful
misconduct, willful malfeasance on the part of such party or reckless disregard
of its duties and obligations, arising out of, or in connection with its
acceptance or administration of the Trust, including the costs and expenses
(including counsel fees) of defending against any claim or liability.

                                  DEPOSITORY

   DTC is a limited purpose trust company and member of the Federal Reserve
System.

                                 LEGAL OPINION

   The legality of the DIAMONDS offered hereby has been passed upon by Carter,
Ledyard & Milburn, New York, New York, as counsel for the Sponsor.

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                            INDEPENDENT ACCOUNTANTS

   The financial statements as of October 31, 2001 included in this Prospectus
have been so included in reliance upon the report of PricewaterhouseCoopers
LLP, independent accountants, 160 Federal Street, Boston, Massachusetts, given
on the authority of said firm as experts in auditing and accounting.

                                CODE OF ETHICS

   The Trust and the Sponsor have adopted a code of ethics regarding personal
securities transactions by employees. Subject to certain conditions and
standards, the code permits employees to invest in DIAMONDS for their own
accounts. The code is designed to prevent fraud, deception and misconduct
against the Trust and to provide reasonable standards of conduct. The code is
on file with the SEC and you may obtain a copy by visiting the SEC at the
address listed on the back cover of this prospectus. The code is also available
on the EDGAR Database on the SEC's Internet site at http:/www.sec.gov. A copy
may be obtained, after paying a duplicating fee, by electronic request at
publicinfo@sec.gov, or by writing the SEC at the address listed on the back
cover of this prospectus.

                      DAILY DIAMONDS TRADING INFORMATION

   The Sponsor makes available daily a list of the names and the required
number of shares of each of the Securities in the current Portfolio Deposit.
The Sponsor also intends to make available (a) on a daily basis, the Dividend
Equivalent Payment effective through and including the previous Business Day,
per outstanding DIAMONDS unit, and (b) every 15 seconds throughout the trading
day at the Exchange a number representing, on a per DIAMONDS unit basis, the
sum of the Dividend Equivalent Payment effective through and including the
previous Business Day, plus the current value of the securities portion of a
Portfolio Deposit as in effect on such day (which value may include a cash in
lieu amount to compensate for the omission of a particular Index Security from
such Portfolio Deposit). Intra-day information will be available with respect
to trades and quotes and underlying trading values will be published every 15
seconds throughout the trading day. Information with respect to net asset
value, net accumulated dividend, final dividend amount to be paid, shares
outstanding, estimated cash amount and total cash amount per Creation Unit will
be available daily prior to the opening of trading on the Exchange.

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                INFORMATION AND COMPARISONS RELATING TO TRUST,
             SECONDARY MARKET TRADING, NET ASSET SIZE, PERFORMANCE
                               AND TAX TREATMENT

   Information regarding various aspects of the Trust, including the net asset
size thereof, as well as the secondary market trading, the performance and the
tax treatment of DIAMONDS, may be included from time to time in advertisements,
sales literature and other communications and in reports to current or
prospective Beneficial Owners.

   Information may be provided to prospective investors to help them assess
their specific investment goals and to aid in their understanding of various
financial strategies. Such information may present current economic and
political trends and conditions and may describe general principles of
investing such as asset allocation, diversification and risk tolerance, as well
as specific investment techniques such as indexing and hedging. In addition,
information may be presented to prospective or current Beneficial Owners
regarding the purchase of DIAMONDS in the secondary market, such as margin
requirements, types of orders that may be entered, and information concerning
short sales. Similarly, market data symbols, trading fractions, other trading
information and the CUSIP number relating to DIAMONDS may be included in such
information. Comparisons with other investment vehicles, such as mutual funds,
may be made with respect to the application of such requirements; costs of fund
management and administration; cost and advantages of intraday trading; and
rules applicable to short sales.

   Information regarding the Trust's net asset size may be stated in
communications to prospective or current Beneficial Owners for one or more
periods, including annual, year-to-date or daily periods. Such information may
also be expressed in terms of the total number of DIAMONDS outstanding as of
one or more periods. Factors integral to the size of the Trust's net assets,
such as creation volume and activity, may also be discussed, and may be
specified from time to time or with respect to various periods of time.
Comparisons of such information during various periods may also be made, and
may be expressed by means of percentages.

   Information may be provided to investors regarding the ability to engage in
short sales of DIAMONDS, including reference to the exemption from the "tick
test" provision of the SEC short sale rule (Rule 10a-1 under the Securities
Exchange Act of 1934), to permit short sales on "minus" or "zero-minus" ticks.
Selling short refers to the sale of securities which the seller does not own,
but which the seller arranges to borrow before effecting the sale.
Institutional investors may be advised that lending their DIAMONDS shares to
short sellers may generate stock loan credits that may supplement the return
they can earn from an investment in DIAMONDS. These stock loan credits may
provide a useful source of additional income for certain institutional

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investors who can arrange to lend DIAMONDS. Potential short sellers may be
advised that a short rebate (functionally equivalent to partial use of proceeds
of the short sale) may reduce their cost of selling short.

   Information may be provided to investors regarding capital gains
distributions by the Trust, including historical information relating to such
distributions. Comparisons between the Trust and other investment vehicles such
as mutual funds may be made regarding such capital gains distributions, as well
as relative tax efficiencies between the Trust and such other investment
vehicles (e.g. realization of capital gains or losses to the Trust and to such
other investment vehicles in connection with redemption of their respective
securities). Based on projected differences between DIAMONDS and conventional
mutual funds with regard to capital gains distributions, projections may be
made regarding comparative capital gains distributions and tax rates for
taxable investors holding DIAMONDS over a long period of time. Comparisons may
also be provided regarding the probable tax impact resulting from rebalancing
of the Trust portfolio and adjustments to the portfolio of an actively managed
investment vehicle.

   Specifically, information may be provided to prospective or current
investors comparing and contrasting the tax efficiencies of conventional mutual
funds with DIAMONDS. Both conventional mutual funds and the Trust may be
required to recognize capital gains incurred as a result of adjustments to the
composition of the DJIA and therefore to their respective portfolios. From a
tax perspective, however, a significant difference between a conventional
mutual fund and the Trust is the process by which their shares are redeemed. In
cases where a conventional mutual fund experiences redemptions in excess of
subscriptions ("net redemptions") and has insufficient cash available to fund
such net redemptions, such fund may have to sell stocks held in its portfolio
to raise and pay cash to redeeming shareholders. A mutual fund will generally
experience a taxable gain or loss when it sells such portfolio stocks in order
to pay cash to redeeming fund shareholders. In contrast, the redemption
mechanism for DIAMONDS does not involve selling the portfolio stocks. Instead,
the Trust delivers the actual portfolio of stocks in an in-kind exchange to any
person redeeming DIAMONDS shares in Creation Unit size aggregations. While this
in-kind exchange is a taxable transaction to the redeeming entity (usually a
broker/dealer) making the exchange, it generally does not constitute a taxable
transaction at the Trust level and, consequently, there is no realization of
taxable gain or loss by the Trust with respect to such in-kind exchanges. In a
period of market appreciation of the DJIA and, consequently, appreciation of
the portfolio stocks held in the Trust, this in-kind redemption mechanism has
the effect of eliminating the recognition and distribution of those net
unrealized gains at the Trust level. Although the same result would obtain for
conventional mutual funds utilizing an in-kind redemption mechanism, the
opportunities to redeem fund shares by delivering portfolio stocks in-kind are
limited in most mutual funds.

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   Investors may be informed that, while no unequivocal statement can be made
as to the net tax impact on a conventional mutual fund resulting from the
purchases and sales of its portfolio stocks over a period of time, conventional
funds that have accumulated substantial unrealized capital gains, if they
experience net redemptions and do not have sufficient available cash, may be
required to make taxable capital gains distributions that are generated by
changes in such fund's portfolio. In contrast, in-kind redemption mechanism of
DIAMONDS may make them more tax efficient investments under most circumstances
than comparable conventional mutual fund shares. As discussed above, in-kind
redemption feature tends to lower the amount of annual net capital gains
distributions to DIAMONDS holders as compared to their conventional mutual fund
counterparts. Since shareholders are generally required to pay income tax on
capital gains distributions, the smaller the amount of such distributions, the
less taxes that are payable currently. To the extent that the Trust is not
required to recognize capital gains, the DIAMONDS holder is able, in effect, to
defer tax on such gains until he sells or otherwise disposes of his shares, or
the Trust terminates. If such holder retains his shares until his death, under
current law the tax basis of such shares would be adjusted to their then fair
market value.

   Information regarding the secondary market trading activity of DIAMONDS also
may be presented over one or more stated periods, such as for daily, monthly,
quarterly or annual periods. Secondary market trading volume information may be
compared with similar information relating to other issues trading on the
Exchange during the same reporting period. Average daily secondary market
trading volume of DIAMONDS may also be reported from time to time. Comparisons
of such information during various periods may also be made, and may be
expressed by means of percentages.

   Information may also be provided in communications to prospective investors
or current Beneficial Owners comparing and contrasting the relative advantages
of investing in DIAMONDS as compared to other investment vehicles, such as
mutual funds, both on an individual and a group basis (e.g., stock index mutual
funds). Such information may include comparisons of costs and expense ratios,
expressed either in dollars or basis points, stock lending activities,
permitted investments and hedging activities (e.g., engaging in options or
futures transactions), and portfolio turnover data and analyses. In addition,
such information may quote, reprint or include portions of financial, scholarly
or business publications or periodicals, including model allocation schedules
or portfolios, as the foregoing relate to the comparison of DIAMONDS to other
investment vehicles, current economic, financial and political conditions,
investment philosophy or techniques, or the desirability of owning DIAMONDS.

   In addition, information on the performance of DIAMONDS based on changes in
price per DIAMONDS with or without reinvesting all dividends and/or any

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distributions of capital in additional DIAMONDS may be included from time to
time in such information. Total return measures the percentage growth in the
total dollar value of an investment in DIAMONDS (reflecting dividends and
capital appreciation but without provision for any income taxes payable).
Average annualized performance will be stated for various periods. Total return
figures may also be stated for a period from the Initial Date of Deposit, a
date at least twelve months prior to the end of the reporting period or for
annual periods for the life of the Trust. Information on the DJIA contained in
this Prospectus, as updated from time to time, may also be included from time
to time in such material. Information on performance of DIAMONDS also may be
presented on an after tax basis, using methods of calculation that are in
accordance with the SEC's rules and regulations. The performance of the Trust,
of the DJIA (provided information is also given reflecting the performance of
the Trust in comparison to that DJIA) or both may also be compared to the
performance of money managers as reported in market surveys such as SEI Fund
Evaluation Survey (a leading data base of tax-exempt funds) or mutual funds
such as those reported by Lipper Analytical Services Inc., Money Magazine Fund
Watch, Wiesenberger Investment Companies Service, Morningstar Incorporated and
Value Line Investment Survey each of which measures performance following their
own specific and well-defined calculation measures, or of the New York Stock
Exchange Composite Index, the American Stock Exchange Index (indices of stocks
traded on the New York and American Stock Exchanges, respectively), S&P 500
Index (a broad-based index of 500 publicly traded common stocks) or the NASDAQ
Composite Index (an unmanaged index of over-the-counter stocks) or similar
measurement standards during the same period of time. In addition to all other
sources of comparative information, comparative performance figures published
by other funds or money managers may be included from time to time. Information
may also be included regarding the aggregate amount of assets committed to
index investing generally by various types of investors, such as pension funds
and other institutional investors, which currently exceeds $300 billion.

   Information on the relative price performance of DIAMONDS in relation to
other securities and/or indices may be represented in the form of
"correlation." Correlation is a standard measure of the degree of linear
association between two price series, and ranges from minus one hundred percent
(-100%) (i.e. perfect negative linear association) to positive one hundred
percent (100%) (i.e., perfect linear association).

   One important difference between DIAMONDS and conventional mutual fund
shares is that the DIAMONDS are available for purchase or sale on an intraday
basis on the American Stock Exchange. An investor who buys shares in a
conventional mutual fund will buy or sell shares at a price at or related to
the closing NAV per share, as determined by the fund. In contrast, DIAMONDS are
not offered for purchase or redeemed for cash at a fixed relationship to
closing NAV. The tables below illustrate the distribution relationship of
DIAMONDS closing prices to NAV

                                      65

<PAGE>

for the period 1/20/98 (the first trading date of the DIAMONDS Trust) through
12/31/01, the distribution relationships of high, low and closing prices over
the same period, and distribution of bid/asked spreads for 2001. This table
should help investors evaluate some of the advantages and disadvantages of
DIAMONDS relative to funds sold and redeemed at prices related to closing NAV.
Specifically, the table illustrates in an approximate way the risks of buying
or selling DIAMONDS at prices less favorable than closing NAV and,
correspondingly, the opportunities to buy or sell at prices more favorable than
closing NAV.

   The investor may wish to evaluate the opportunity to buy or sell on an
intraday basis versus the assurance of a transaction at or related to closing
NAV. To assist investors in making this comparison, the table illustrates the
distribution of percentage ranges between the high and the low price each day
and between each extreme daily value and the closing NAV for all trading days
from 1/20/98 through 12/31/01. The investor may wish to compare these ranges
with the average bid/asked spread on DIAMONDS and add any commissions charged
by a broker. The trading ranges for this period will not necessarily be typical
of trading ranges in future years and the bid/asked spread on DIAMONDS may vary
materially over time and may be significantly greater at times in the future.
There is some evidence, for example, that the bid/asked spread will widen in
markets that are more volatile and narrow when markets are less volatile.
Consequently, the investor should expect wider bid/asked spreads to be
associated with wider daily spread ranges.

                                      66

<PAGE>

     Daily Percentage Price Ranges: Average and Frequency Distribution for
              DIAMONDS Trust and DJIA: Highs and Lows vs. Close*
                        (From 1/20/98 through 12/31/01)

DOW JONES INDUSTRIAL AVERAGE

<TABLE>
<CAPTION>
                                        Intraday High Value   Intraday Low Value
                   Daily % Price Range  Above Closing Value  Below Closing Value
                   -------------------  -------------------  -------------------
      Range        Frequency % of Total Frequency % of Total Frequency % of Total
      -----        --------- ---------- --------- ---------- --------- ----------
<S>                <C>       <C>        <C>       <C>        <C>       <C>
           0--.25%      0        0.00%     264       26.59%     212       21.35%
          .25--.5%      7        0.70%     183       18.43%     187       18.83%
            .5--1%    179       18.03%     272       27.39%     268       26.99%
           1--1.5%    343       34.54%     132       13.29%     165       16.62%
           1.5--2%    240       24.17%      71        7.15%      89        8.96%
           2--2.5%    111       11.18%      41        4.13%      38        3.83%
           2.5--3%     56        5.64%      13        1.31%      13        1.31%
           3--3.5%     26        2.62%       8        0.81%      10        1.01%
(greater than)3.5%     31        3.12%       9        0.91%      11        1.11%
-----------------     ---      ------      ---      ------      ---      ------
Total                 993      100.00%     993      100.00%     993      100.00%
</TABLE>

                         Average Daily Range: 1.6238%

DIAMONDS TRUST
<TABLE>
<CAPTION>
                                        Intraday High Value   Intraday Low Value
                   Daily % Price Range  Above Closing Value  Below Closing Value
                   -------------------  -------------------  -------------------
      Range        Frequency % of Total Frequency % of Total Frequency % of Total
      -----        --------- ---------- --------- ---------- --------- ----------
<S>                <C>       <C>        <C>       <C>        <C>       <C>
           0--.25%      0        0.00%     238       23.97%     215       21.65%
          .25--.5%      5        0.50%     200       20.14%     173       17.42%
            .5--1%    162       16.31%     266       26.79%     284       28.60%
           1--1.5%    354       35.65%     139       14.00%     158       15.91%
           1.5--2%    229       23.06%      72        7.25%      87        8.76%
           2--2.5%    114       11.48%      44        4.43%      32        3.22%
           2.5--3%     68        6.85%      15        1.51%      23        2.32%
           3--3.5%     26        2.62%       6        0.60%       7        0.70%
(greater than)3.5%     35        3.52%      13        1.31%      14        1.41%
------------------    ---      ------      ---      ------      ---      ------
Total                 993      100.00%     993      100.00%     993      100.00%
</TABLE>

                         Average Daily Range: 1.6765%
--------
* Source: Bloomberg

                                      67

<PAGE>

     Frequency Distribution of Discounts and Premiums for DIAMONDS Trust:
          Closing AMEX Price vs. Net Asset Value (NAV) as of 12/31/01

<TABLE>
<CAPTION>
                       Calendar  Calendar  Calendar   Calendar              From
                        Quarter   Quarter   Quarter   Quarter   Calendar 1/20/1998
                        Ending    Ending    Ending     Ending     Year    through
      Range            3/31/2001 6/30/2001 9/30/2001 12/31/2001   2001   12/31/2001
-----------------------------------------------------------------------------------
<S>               <C>  <C>       <C>       <C>       <C>        <C>      <C>
                  Days    --        --        --        --        --        --
(greater than)200 -----------------------------------------------------------------
  Basis Points     %      --        --        --        --        --        --
-----------------------------------------------------------------------------------
                  Days    --        --        --        --        --        --
    150--200      -----------------------------------------------------------------
  Basis Points     %      --        --        --        --        --        --
-----------------------------------------------------------------------------------
                  Days    --        --        --        --        --         1
    100--150      -----------------------------------------------------------------
  Basis Points     %      --        --        --        --        --       0.1%
-----------------------------------------------------------------------------------
                  Days    --        --        --        --        --         9
     50--100      -----------------------------------------------------------------
  Basis Points     %      --        --        --        --        --       0.9%
-----------------------------------------------------------------------------------
                  Days     3         5         4         5        17        95
     25--50       -----------------------------------------------------------------
  Basis Points     %     4.8%      7.9%      6.8%      7.8%      6.9%      9.6%
-----------------------------------------------------------------------------------
                  Days    27        28        21        32        108       402
      0--25       -----------------------------------------------------------------
  Basis Points     %     43.5%     44.4%     35.6%     50.0%     43.5%     40.5%
-----------------------------------------------------------------------------------
                  Days    30        33        25        37        125       507
   Total Days     -----------------------------------------------------------------
   at Premium      %     48.4%     52.4%     42.4%     57.8%     50.4%     51.1%
-----------------------------------------------------------------------------------
                  Days     1        --         3        --         4         5
  Closing Price   -----------------------------------------------------------------
  Equal to NAV     %     1.6%       --       5.1%       --       1.6%      0.5%
-----------------------------------------------------------------------------------
                  Days    31        30        31        27        119       481
   Total Days     -----------------------------------------------------------------
  at Discounts     %     50.0%     47.6%     52.5%     42.2%     48.0%     48.4%
-----------------------------------------------------------------------------------
                  Days    20        26        20        21        87        371
     0-- -25      -----------------------------------------------------------------
  Basic Points     %     32.3%     41.3%     33.9%     32.8%     35.1%     37.4%
-----------------------------------------------------------------------------------
                  Days    10         2        10         5        27        93
    -25-- -50     -----------------------------------------------------------------
  Basis Points     %     16.1%     3.2%      16.9%     7.8%      10.9%     9.4%
-----------------------------------------------------------------------------------
                  Days     1         2         1         1         5        16
   -50-- -100     -----------------------------------------------------------------
  Basis Points     %     1.6%      3.2%      1.7%      1.6%      2.0%      1.6%
-----------------------------------------------------------------------------------
                  Days    --        --        --        --        --        --
   -100-- -150    -----------------------------------------------------------------
  Basis Points     %      --        --        --        --        --        --
-----------------------------------------------------------------------------------
                  Days    --        --        --        --        --        --
   -150-- -200    -----------------------------------------------------------------
  Basis Points     %      --        --        --        --        --        --
-----------------------------------------------------------------------------------
                  Days    --        --        --        --        --         1
 (less than)-200  -----------------------------------------------------------------
  Basis Points     %      --        --        --        ---       --       0.1%
-----------------------------------------------------------------------------------
</TABLE>

  Close was within 0.25% of NAV better than 78% of the time from 1/20/98 (the
              first day of trading on the AMEX) through 12/31/01.

--------
Source: American Stock Exchange LLC.

                                      68

<PAGE>

DIAMONDS BID/ASKED SPREAD DISTRIBUTION (2001 only)

<TABLE>
<CAPTION>
                         Range ($)           % of Total
                         ---------         ------------
                         <S>               <C>
                         0.01-0.05             10.38%
                         0.06-0.10             33.70%
                         0.10-0.15             39.52%
                         0.15-0.20             13.42%
                         0.20-0.25              1.74%
                         0.25-0.50              1.13%
                         (greater than).50      0.10%
                         -----------------    ------
                         Total                100.00%
</TABLE>

        The price range of shares for 2001 was from $79.51 to $113.64,
        consequently, $0.25 was from 0.31% to 0.22% of the share price.
--------
* Source: American Stock Exchange LLC

   Information relating to the relative price performance of DIAMONDS may be
compared against a wide variety of investment categories and asset classes,
including common stocks, small capitalization stocks, long and intermediate
term corporate and government bonds, Treasury bills, the rate of inflation in
the United States (based on the Consumer Price Index ("CPI") and combinations
of various capital markets. Historical returns of these and other capital
markets in the United States may be provided by independent statistical studies
and sources, such as those provided by Ibbotson Associates of Chicago,
Illinois. The performance of these capital markets is based on the returns of
different indices. Information may be presented using the performance of these
and other capital markets to demonstrate general investment strategies. So, for
example, performance of DIAMONDS may be compared to the performance of selected
asset classes such as short-term U.S. Treasury bills, long-term U.S. Treasury
bonds, long-term corporate bonds, mid-capitalization stocks, foreign stocks and
small capitalization stocks and may also be measured against the rate of
inflation as set forth in well-known indices (such as the CPI). Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. Performance of DIAMONDS may also be compared to that of
other indices or compilations that may be developed and made available to the
investing public in the future. Of course, such comparisons will only reflect
past performance of DIAMONDS and the investment categories, indices or
compilations chosen and no guarantees can be made of future results regarding
the performance of either DIAMONDS or the asset classes chosen for such
comparisons.


                                      69

<PAGE>

                                   GLOSSARY
<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
   <S>                                                                   <C>
   "10 Basis Point Limit"...............................................   7
   "Adjustment Amount"..................................................  52
   "Adjustment Day".....................................................  36
   "Balancing Amount"...................................................  36
   "Beneficial Owners"..................................................  28
   "Business Day".......................................................   3
   "Cash Component".....................................................   5
   "Cash Redemption Payment"............................................  30
   "Closing Time".......................................................  26
   "Code"...............................................................   8
   "Creation Units".....................................................   4
   "Depository Agreement"...............................................  28
   "DIAMONDS"...........................................................   3
   "DIAMONDS Clearing Process"..........................................   5
   "Distributor"........................................................   4
   "Dividend Equivalent Payment"........................................   5
   "Dividend Payment Date"..............................................  53
   "DJIA"...............................................................   3
   "DTC"................................................................   7
   "DTCC"...............................................................  24
   "DTC Cut-Off Time"...................................................  33
   "DTC Participants"...................................................  27
   "Evaluation Time"....................................................   1
   "Ex-Dividend Date"...................................................  53
   "Excess Cash Amounts"................................................  30
</TABLE>
<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
   <S>                                                                   <C>
   "Exchange"...........................................................   4
   "Index Securities"...................................................   3
   "Indirect Participants"..............................................  27
   "License Agreement"..................................................   i
   "NAV"................................................................   3
   "NAV Amount".........................................................  36
   "NSCC Business Day"..................................................  11
   "NSCC"...............................................................   5
   "Participant Agreement"..............................................   5
   "Participating Party"................................................   5
   "Portfolio"..........................................................   3
   "Portfolio Deposit"..................................................   5
   "Portfolio Deposit Amount"...........................................  36
   "Portfolio Securities"...............................................   3
   "Record Date"........................................................  53
   "Request Day"........................................................  36
   "SEC"................................................................   5
   "Service"............................................................   8
   "Sponsor"............................................................   3
   "Transaction Fee"....................................................   7
   "Transmittal Date"...................................................  24
   "Trust"..............................................................   3
   "Trust Agreement"....................................................   3
   "Trustee"............................................................   3
</TABLE>

                                      70

<PAGE>

DIAMONDS TRUST, SERIES 1

SPONSOR:
PDR SERVICES LLC

--------------------------------------------------------------------------------

This Prospectus does not include all of the information with respect to the
DIAMONDS Trust set forth in its Registration Statement filed with the SEC in
Washington, D.C. under the:

  Securities Act of 1933 (File No. 333-31247) and
  Investment Company Act of 1940 (File No. 811-9170).

To obtain copies from the SEC at prescribed rates
Write: Public Reference Section of the SEC
       450 Fifth Street, N.W., Washington, D.C. 20549-6009
Call: 1-800-SEC-0330
Visit: http://www.sec.gov

--------------------------------------------------------------------------------

No person is authorized to give any information or make any representation
about the DIAMONDS Trust not contained in this Prospectus, and you should not
rely on any other information. Read and keep this Prospectus for future
reference.

--------------------------------------------------------------------------------

PDR Services LLC has filed a registration statement on Form S-6 and Form N-8B-2
with the SEC covering DIAMONDS. While this prospectus is a part of the
registration statement on Form S-6, it does not contain all the exhibits filed
as part of the registration statement on Form S-6. You should consider
reviewing the full text of those exhibits.

--------------------------------------------------------------------------------

Prospectus dated February 22, 2002

</TEXT>
</DOCUMENT>
